Due the technology boom in the late 1990s, which was coincidental with the rapid expansion of globalism and open innovation, and was then amplified by the less-than-stellar behaviors of certain countries, IP began to increase as a corporate priority.

As is the case when companies need to get their arms around new issues or opportunities, IP was first formed as “its own thing.” There was an “IP Department.” Executives know that they must subsequently facilitate the integration a new requirement or capability into the right places in their organizations. Leading companies began to do it around 2005. For example, IP professionals were collocated in R&D and had dual reporting relationships – among many other techniques.

There was another issue though. That issue remains today. Valuing IP is a real bear. Little by little industry is building experience as each transaction occurs. However, it is still the wild west. The value is what you are willing to pay for it. Finance folks rule the roost. Accounting folks are a long way from being able to assign standard values. But, as experience builds, standard-like values will emerge as industry gains more and more examples for reference. For certain types of commodity IP, standard ranges have already formed.

Well, as IP integration and uptake occurs, metrics follow. Patents and Trademarks have long been metrics used by R&D and Product Development. They are three of the top five still, and will likely remain. But, two of the top five penetrating IP metrics have now been superseded by “licensing.” “Number of Out-Licenses” and “Number of In-Licenses” have cracked the top five IP metrics now used across industries by the innovation functions.

Licensing is another form of codified IP, like patents. Note that industry is still counting “its,” as it still does with patents (vs. “monetized revenues and/or profits”), but this is a clear sign of the progress of integration and awareness building.

GGI started doing primary research on the penetration of specific metrics in R&D and Product Development in 1998. Now 2017, about 20 years time, we have taken the pulse six times. Once every 3-4 years is a good cadence for R&D. Process change takes more time in long duration business functions, such as the innovation functions, and then metrics follow.

There are always incremental changes in each research effort, and a few new metrics like the “Vitality Index” and “ROInnovation” that arise out of the blue, but the overall tenor remained the same. CEOs accepted “activity metrics” from R&D. This has been true since the start of my career.

Well, evolving from the economic challenges of this past decade, CEOs now expect business performance metrics to a much greater extent. Activity metrics still prevail among the top cross-industry metrics, but the tide has clearly shifted. New Product Revenues (aka Vitality Index) cracked the Top 10 in the early 2000s. But, not a single measure of profit could be seen – until recently.

Business performance measures musn’t always be about revenue and profits, by any means. The point is that there has been “a glaring absence of any prevalence of true performance measures.”

The additions, changes, and rearrangements in the Top 10 won’t knock your socks off. But, given the decades of historical consistency, this is great progress in the advancement of management science for the creative functions.

We looked at 101 different corporate-level metrics. Here are the Top 10. You be the judge.

How much “overhead” does your company require of its professionals chartered with inventing the future? Does your company manage to keep overhead below 50%? Historical figures indicate “other responsibilities” took almost 65% of the work day.

Add Personal Freedoms To Structural Overhead

What about personal activities that get juggled during the work day at a much greater rate than in the 20th Century, now that everyone has cell phones and personal devices in the 21st Century? Are professionals working longer hours to compensate for the personal time they take during the work day (Figure 1)?

Figure 1

Focused Work vs. Unfocused Work

Does multitasking further infringe on productivity, just as repeated set ups and tear downs used to infringe on manufacturing productivity? The act of switching tasks requires mental time to regain one’s previous train of thought. How many times does switching occur each day? Certainly there is more switching during a work day today than in any time in human history. How many times can one switch tasks each day without incurring overall mental fatigue that affects all work, and one’s personal life?

Is anyone paying attention? Or, is this topic now considered an infringement on people’s freedoms – even though their employer is paying them for a full work day? Is it heresy to even bring up the subject in this day and age? Many would say yes! It is heresy!

Little Picture vs. Big Picture

The preceding paragraphs address the trials and tribulations of individuals in the workplace during a typical work day. But, there is more to it. Company cultures have impacts. Country cultures have impacts? And, these impacts accumulate over time.

In the next ten years there will be a rearrangement of the top industrialized countries as measured by Gross Domestic Product. Do the countries that are forecast to become the dominant economic players of the future permit such daily workplace freedoms? Likely not. Are any of the industrialized nations that lead the world today currently forecast to rise in global rankings? None that I am aware of.

What then is the impact of employer overhead? What is the impact of personal daily freedoms in mature industrialized economies, that are now considered to be almost a human’s right, on the ranking of countries and their prosperity a decade from now? Will dropping productivity trends reverse their course? No they won’t, not unless something changes.

Living In Reality

Once rights or benefits have been granted or assumed, it is hard to reverse course. Certainly no one wants to go backwards. But, it seems that as we have moved forward on an individual level in the little picture that it is having a non-positive impact on the big picture – which will play out in the not too distant future.

Metrics lag the introduction of new processes and new technologies by several years. There are many reasons. New business processes take years to evolve and become the new normal. Then, new measures get adopted. The infrastructure behind metrics is complex. People have to change what they track and record, then IT has to put it into a system. Management is uncomfortable with new metrics that do not have several years of past data. Few choose to recreate that data; rather they wait several years for it to accumulate and then they place the new metric into service. As well, R&D and product development are among the least understood major business functions. Business leaders hesitate to change measures in areas where they did not have direct experience on their way to the top of the corporate ladder. Metrics for IoT-enabled products, processes, and technologies will be no different.

Risk Being Wrong

However, the IoT has been around for a few years now. Some companies are in their third generation of IoT-enabled products and have some initial metrics in place. Other companies are just warming up. Given the almost unlimited scope of what the internet makes available, and thereby enables for all companies, picking one’s spots will be critical.

Discussions about appropriate metrics should probably begin sooner then they have historically begun. Focusing on what to measure will spur the refinement of strategy and thinking on competitive positioning.

Get Organized

While there will be many new metrics, GGI estimates roughly fifty will be tried and will subsequently sort-out to a handful that will become widely adopted across industry, it will be best not to wait to see what others measure. The playing field is nearly unlimited. The generally adopted metrics may not yield the specific strategic advantages that most companies will seek. Don’t sit back and wait to copy what others have done.

Over time, metrics will generally sort-out to four major categories: Corporate Metrics, Project/Product Metrics, Functional/Technical Metrics, and Improvement Metrics. A corporate brainstorming session might begin with these four areas for thought, and then seek input from participants using these general buckets to organize ideas.

Turn Over Rocks

At the next level of thinking, metrics for the IIoT and IoT will be different than many other corporate initiatives that have occurred over the years. For example, take Open Innovation. Whether a product originated organically or openly, the same measures capture customer experience. This will not be the same for IIoT- and IoT-Enabled products. Data generated internally within a company’s IIoT may have some utility for customers. Data acquired externally through the IoT, and/or a customer’s use of a product, may have some utility for the company that originally created the product – to enhance it, perhaps in real time.

These data may also be selectively packaged to create new “soft products,” that may or may not have anything to do with the value offering of the original product, that could produce incremental revenues and profits. Few can see this far ahead. It will take time for big data to accumulate to know for sure the assets one has, or has access to, but forge ahead with the thinking.

Thinking through these four areas will result in generating ideas that may then be subsequently refined to become Corporate Metrics, Project/Product Metrics, Functional/Technical Metrics, and Improvement Metrics.

On October 3-4, 2017, in conjunction with Moon-On-A-Stick [MOAS], GGI will be presenting a fast-paced two-day version of our R&D-Product Development Metrics Summit at the renowned Moller Center at Churchill College on the University of Cambridge campus in England.

We’ve never attempted the subject matter in two days before. Most feedback over the 21 Metrics Summits GGi has held in the USA is that three days was tight. Participants are sure to to have their gray matter running overtime!

MOAS is the reincarnation of a firm GGI collaborated with a dozen years ago. Under new ownership, our paths have crossed again on the subjects of innovation and measurement. Currently, Dr. Robert Cooper collaborates with them on agile and Stage-Gate®. Dr. Jay Paap collaborates with them on technology strategy and roadmapping. GGI will collaborate with them on performance measurement and metrics.

The Webinar

MOAS asked if GGI would give a webinar that would stand alone as an educational session, while also giving an overview of what folks might expect on October 3-4. The webinar occurred Tuesday April 25 and lasted 42 minutes.

If you would like to view a recording of the webinar, we ask that you provide your name and email address to see the streamed video. Warning. You are sure to get a follow-up email or two to see if you might want to participate in October. 🙂

Needham, Massachusetts (PRWEB) February 07, 2017 — At least once every decade, technological advancements and stronger competition have necessitated the creation of measures that both drive and monitor the innovation performance of new technology and product capabilities. The advent of the Industrial Internet (IIoT) and the Internet of Things (IoT) will be no different. The few IIoT/IoT metrics that exist today will multiply greatly in number in the decade ahead. Industry leaders, as they did for the explosion of intellectual property metrics this past decade, and product portfolio and open innovation metrics before that, will develop new metrics that specify IIoT and IoT design criteria and requirements in product creation and development processes so as to systematically enable capabilities across their products and product lines.

New-To-The-World IIoT & IoT Metrics

There will be IoT-related metrics to assure sensors exist on and within products to gather data throughout the product life cycle. There will be metrics that quantify the ability of sensors to generate, qualify, and archive data to big data repositories. There will be metrics that gauge the amount of data actually captured vs. data that was lost or corrupted. There will be metrics that rate a company on the ability of their products to fit in multi- vendor settings, such as emergency rooms or factory floors or transportation hubs. In many ways, the sky is the limit for the number of metrics that might be created for a technology with a goal to tie everything together.

To be competitive at the end game, companies will need strong design thinking to modify their R&D, product development, and product commercialization processes. Capabilities will need to be designed-in to products and be part of the “product’s system.”

GGI is currently concentrating our efforts on IIoT and IoT metrics that drive and enable capabilities in products and their manufacturing processes. For example, in the areas of product architecture and modularity, expect metrics that rate product designs on their “sensor-readiness,” “ability to receive and adjust to signals during manufacture and then in customer settings,” and “ability to generate data of customer value.” In the areas of product planning and definition, expect metrics that assess the strength of the product to “fit with data gathering/producing/monitoring infrastructure” of the differing markets and customer environments. In the areas of product design and development, expect metrics that assess the “effectiveness, efficiency, and coverage of sensors” in the product; along with new “reliability measures for up-time and data error rates.”

New metrics and KPIs will also emanate from customers and the marketplace(s). Customer satisfaction is sure to have a number “IoT satisfaction” components. Research companies and market/investor analysts are sure to develop “comparative indices on the best IoT-enabled industries and companies.

More Emphasis On Risk Management

The Internet of Things is not the only measurement area that is getting attention. With all that is going on in the world, Risk Metrics are evolving. Most companies, ERM system or not, have little actual knowledge of the monetary business, portfolio, and product risks they face. Only 35-40% of companies can currently quantify their potential risk costs. HBR’s article on “VUCA” has helped many to think outside the traditional risk metrics box.

Better Innovation Productivity & Efficiency Metrics

CFOs are becoming more active in creating metrics that measure the financial output of R&D and product development, for a given amount of R&D spending; productivity equals output divided by input. The Great Recession spawned new metrics like “NPD Efficiency” and “Research Quotient.”

Personal & Corporate Advancement

If staying current and employing the best available metrics is important to you or your company, please join us February 28 to March 2, 2017 in Norwood, Massachusetts for the 21st R&D-Product Development Metrics Summit. We will discuss the KPIs, metrics, and measures that drive innovation productivity and performance from a C-Level viewpoint. Marketing managers, program managers, and technical managers that manage budgets or groups of people will also embrace this curriculum and workshop.

The 21st R&D-Product Development Metrics Summit is coming up, February 28 to March 2, 2017, in Norwood, MA. Our conference facility is equidistant between the Providence and Boston airports. A comprehensive renovation was just completed last fall. We are easy to get to, the place is beautiful, and the food is great!

New Micro-Seminar Added

Most important is the content. We’re adding a new section on IIoT and IoT metrics in the Workshop; and we’re projecting that one or more of the metrics we’re rolling out will be mainstream in 5-7 years. We’ve done this before, several times. The Internet of Things comes of age within two or three product cycles. Does your company systematically “design-for-the-IoT?” Can you measure it as an organization?

What’s New

In addition to the IIoT and IoT, recent curricula additions of micro-seminars on metrics for advanced development and intellectual property inspired some alumni from GGI’s initial Summits to return for an update. They were not disappointed. Gen 6, 7, and 8 of advances in the science of managing R&D and product development have significantly changed the landscapes of process and metrics.

The Top 100 Corporate Metrics underwent a historic change during the prolonged recession. The Top 25 metrics are now in a different order. Real innovation was way down, but measurement science progressed. The specificity of measuring innovation rose. Human Resources protocols opened-up in several ways, enabling performance metrics that were near taboo a decade and more ago. Much more.

If you have not yet participated in GGI’s Metrics Summit, please give it some thought. If you’re an alumni before 2012, we hope it is food for thought for you. Pure innovation will be on the rise in the years ahead. We can see it restarting already! Effectiveness, efficiency, and productivity initiatives will continue. These opposing goals are no easy challenge. Are you using metrics to tease the best innovation, output, and productivity from your R&D organizations?

Participant Companies

We’re honored that these great companies included GGI as part of their thinking for measuring R&D, product development, engineering, and scientific performance.

Two years ago at the 53rd R&D 100 Awards, some 15 of the winning companies had participated in GGI’s Summits – including two of the actual winners who walked to the stage. We hope this metric correlates for you.

More Updated Content

Just this past year alone, updates include a number of new CXO-level metrics that hit critical mass in 2015 and 2016. And, we have a fresh look at the Top 100 Metrics used in industry. The great recession created significant change in the metrics corporations now use to drive productivity and performance. This new information is statistically accurate.

Plus, with all that is going on the world, the science of measuring Risk is getting attention. Most companies, ERM system or not, have little actual knowledge of the business, portfolio, and product risks they face. We have taken the view of a CFO for the advances in risk science that we will be presenting.

Please Join Us In Early Spring 2017

Senior executives wishing to put themselves and their colleagues in a better position to direct and drive product creation and commercialization should strongly consider attending. Many participants have said, “this Summit covers everything an officer and senior manager needs to know on the subject of Metrics.”

Please join us. Most participants are surprised at the practical approaches and thinking they take away.

This is the third and final article of three consecutive monthly articles in Machine Design [November 2016, December 2016, January 2017] discussing the strategies and tactics that companies should take to position themselves to compete effectively as the Internet of Things evolves to become the end game for products and services in the years ahead.

This article makes the point, like all major industry process and/or technology initiatives, that a whole new group of metrics will be developed to facilitate and monitor the “capabilities” and “readiness” of products and processes to perform in the age of the Industrial IoT [IIoT] and IoT. Most recently, we saw this happen with intellectual property as the channels to monetize it came of age.

Industry leaders already have IIoT and IoT strategies and are now augmenting their products and processes, and creating appropriate metrics. Most companies are still working on their strategy.

This is the second article of three consecutive monthly articles in Machine Design [November 2016, December 2016, January 2017] discussing the strategies and tactics that companies should take to position themselves to compete effectively as the Internet of Things evolves to become the end game for products and services in the years ahead.

This article makes the point that capabilities for the Industrial Internet [IIoT] and the Internet of Things [IoT] should begin at the earliest stages of product architecture and the commissioning of the product into the development pipeline. Certainly, many existing products will need to be retrofitted for IIoT and IoT capabilities. But, the time to start initiatives for new product “IIoT/IoT-Readiness” is now.

This is the first article of three consecutive monthly articles in Machine Design [November 2016, December 2016, January 2017] discussing the strategies and tactics that companies should take to position themselves to compete effectively as the Internet of Things evolves to become the end game for products and services in the years ahead.

This article makes the point that the conclusions of higher level analytics and artificial intelligence, which are based on the available big data, will be insufficient and/or inaccurate if the sensors that are built into the product and its process of manufacture do not capture “all” the available data or cannot react to the data that is available. Robust sensor deployment and engagement/reaction will likely form the foundation for the wealth that will be generated from the Internet of Things.

This is the third and final article of a three-part monthly series in Machine Design on measuring product development at the CXO level. The first article addresses productivity and efficiency. The second article addresses effectiveness and output. This final article addresses maturity and predictability.

The August article is entitled “Measuring Product Development Productivity.” [Machine Design – August 2016] Productivity is an extremely important topic, especially in challenging economic times. It is absolutely appropriate for today’s corporate leaders and managers to emphasize “Productivity.” However, productivity measurement is becoming too pervasive across all business functions. And, productivity measurement is being applied at levels that are too low in many organizations. Productivity may not be the best #1 metric for business areas that are not yet mature in their execution.

The September article is entitled “Measuring Product Development Effectiveness.” [Machine Design – September 2016] This article delves further into the appropriateness of productivity as the primary measure for business areas that have not yet matured, such as R&D and product development. It makes the case that “Effectiveness” may be a preferable #1 metric for immature functions and disciplines. Product Management, R&D, and Product Development (among others) all have several decades remaining before maturity is reached.

The October article is entitled “Measuring Product Development Maturity.” [Machine Design – October 2016] It would not be right to use “Maturity” as the factor in the first two articles to distinguish between the use of “productivity” versus “effectiveness” as the primary KPI, without also providing a definition of “maturity” for these so-called immature functions. The ability to accurately predict input needs and output results is the business-level definition of maturity. The exact components of input and output maturity will differ by business area. The Carnegie-Mellon Software Engineering Institute “Capability Maturity Model” is also discussed.

A quick note to let you know that our 20th R&D-Product Development Metrics Summit is coming up, October 18-20 in Norwood, MA. Our conference facility is equidistant between the Providence and Boston airports, and a comprehensive renovation has just been completed. The place is beautiful and the food is great.

New Participants & Alumni Too

Since 2005, when we held our first Metrics Summit, the structure of the Summit has remained the same. But, now a decade later, near 100% of the content is updated; as are the course books. Last year, folks that had attended our initial Summits (back when) started returning for an update. They were not disappointed. If you participated before 2012, almost 100% will be new material to you.

Latest Updated Content

Just this past year alone, updates include a number of new CXO-level metrics that hit critical mass in 2015. And, we have a fresh look at the Top 100 Metrics used in industry. The great recession created significant change in the metrics corporations now use to drive productivity and performance. This new information is statistically accurate.

Plus, with all that is going on the world, the science of measuring Risk is getting attention. Most companies, ERM system or not, have little actual knowledge of the business, portfolio, and product risks they face. We have taken the view of a CFO for the advances in risk science that we will be presenting.

New-To-The-World Internet-of-Things [IoT] Metrics

The Internet of Things is evolving rapidly. The IoT affects the product lines and process environment of just about every company, yet no one is systematically measuring the IoT at this time. In ten years there will be two types of companies, those adept in IoT and those that will get bought by those that are adept. To that end, as GGI has done in each decade, we have been developing forward-looking new-to-the-world metrics for critical areas where metrics do not yet exist.

We will be rolling out IoT and IIoT Metrics for the first time at the 20th Metrics Summit. The new module will be presented during the Workshop along with our more recent modules on Intellectual Property, Advanced Development, and Functional/Technical Competency metrics for product development.

In the years ahead, it will be necessary to measure IoT prowess at the top of the organization. It will be necessary to measure IoT capabilities added by projects and those delivered in products. It will be necessary to measure the IoT abilities of professionals as relates to their functional and technical responsibilities. And, of course, it will be necessary to measure IoT improvement efforts. We are not sure that everything we have created will become mainstream over the next decade, but we have a track record for the last thirty years of being among the first to anticipate the next great waves of metrics.

Much of our developmental work becomes mainstream. The most recent example of this is what we did to tie both Advanced Development activities and Intellectual Property into Product Development, and then into Sales and Profits. We are not allowed to tell you which companies, but they did attend our Summits and you know their names.

Please Join Us In October

Senior executives wishing to put themselves and their colleagues in a better position to direct and drive product creation and commercialization should strongly consider attending. Many participants have said, “this Summit covers everything an officer and senior manager needs to know on the subject of Metrics.”

Please join us. Content is stimulating, and our Summit discussions and Workshop are great fun too.

Most folks that follow my writings know that I’ve been authoring the inside back page article for Machine Design for several years now. You have probably recognized that my goal is to make each article a stand-alone piece. On a few occasions there have been a Part 1 and Part 2. For the months of August, September, and October 2016 there are three articles with separate and unique titles, but whose content is interrelated. All three start with “Measuring Product Development,” which is then followed by the topic for that month. This is important because it is possible to legitimately nitpik each article for incompleteness of thought. (Being limited to 600 words every month presents several challenges.) But, if one takes the three articles as a whole, a clearer picture emerges. At this time, two of the three have been published. The third article is due out soon.

The August article is entitled “Measuring Product Development Productivity.” [Machine Design – August 2016] Productivity is an extremely important topic, especially in challenging economic times. It is absolutely appropriate for today’s corporate leaders and managers to emphasize productivity. However, productivity measurement is becoming too pervasive across all business functions. And, productivity measurement is being applied at levels that are too low in many organizations.

Too Pervasive

The August article makes the point that not all business and technical functions have achieved comparable levels of maturity. Let’s discuss logistics, manufacturing, and product development to make the point. Logistics became mature in the late 1970s. Barring a force majeure, delivery times could be predicted with near perfect accuracy. In 1983, FedEx was born. For the last thirty-plus years, the delivery of goods and packages has been performed with near 100% accuracy. Today, there are a number of competitors. Their output (delivery) is equivalent and they are all competing on reducing the input (cost). Manufacturing was next to become mature. By the early 2000s, again barring a force majeure, goods were manufactured on time to near perfect quality levels and were made available to the logistics function to ship. Today, nearly every organization is filled with professionals holding Six Sigma Certifications. Poor quality, scrap, and rework, that used to be measured as a percentage of cost of goods sold, is now measured in parts per million. There are no comparable analogies for Product Development. Product Development is still on the path to maturity. Productivity may not be the best “top priority” metric for Product Development.

Too Low

The discipline of “operations research” teaches, among other things, that if a system is optimized at too low a level in the system that the system as a whole will not be optimized. The August article makes the point that each manager at each level of the product development organization hierarchy is now trying to optimize the productivity of their organization. By definition, this means that the R&D-Product Development organization as a whole is being sub-optimized.

The September article is entitled “Measuring Product Development Effectiveness.” [Machine Design – September 2016] This article delves further into the appropriateness of productivity as the primary measure for functions that have not yet matured. It makes the case that “Effectiveness” may be a preferable primary measure for immature functions and disciplines. Product Management, R&D, and Product Development (among others) all have several decades remaining before maturity is reached.

The October article is entitled “Measuring Product Development Maturity.” [Machine Design – October 2016] It would not be right to use “maturity” as the factor to distinguish between “productivity” and “effectiveness” without also offering a definition of “maturity” for immature functions. As it turns out, the definition of maturity will differ by function. The October article will focus on Product Development maturity. The Carnegie-Mellon Software Engineering Institute “Capability Maturity Model” is also discussed.

GGI has been a pioneer in product development measurement since the early 1990s. We’ve been formally researching industry and corporate measurement practices ever since.

For some time, even past when we introduced “proactive” metrics and refined “predictive” metrics for R&D and Product Development in 1997, we continued to defer to the business frameworks that industry was using. We would “fit” our measures into current structures and hierarchies of the companies that hired us. It was fine. They were happy. The outcome was better than what preceded it.

But personally, I kept wrestling in my mind that something wasn’t right. It was like an indicator panel where each light could be recognized but the context was not right. The frameworks didn’t paint the picture for R&D or Product Development. It was difficult to determine the actions to take to create improvement.

Along the way, I had the pleasure of introducing Robert Kaplan at the conference where he introduced Balanced Scorecard to the world. And, I watched it pervade industry.

My masters, hidden under the MBA acronym, was in accounting and operations. Everything needed for a CPA. I understand business measurement structure, financial and cost accounting. Balanced Scorecard was definitely an asset to bring additional improvement to corporate management and to many many functions. However, it still was a force-fit for R&D. I never met a VP R&D or Product Development that liked it. They would do what they needed to do and put the necessary metrics into whatever scorecard the CEO told them to use.

A Better Measurement Approach For R&D & Product Development

I kept stewing on this mismatch, which I observed in a couple other corporate functions as well, and it hit me on a summer day in 2002. While every function needed to align with GAAP no doubt, that the entire system was based on transactions as it was those transactions that collectively generated the business value. In short, everything was about buy and sell products or services and the myriad of transactions that are needed to execute an order to generate the business value.

R&D and Product Development are different. Yes, there are a myriad of transactions to go from concept to customer; and many just to run the organizations that create products and/or IP. But, the business value is generated by the completion of a project. The project produces a product (or service) (and/or IP) and that is where GAAP starts. Upon further reflection, the other functions that are a mismatch also generate their value from projects and are “pre-product” or “post-product” as well. This is a whole other discussion that I’ll leave for another day.

On that summer day in 2002, on my porch, the Linked Metrics Portfolio® [LMP] was born. It is a performance measurement framework uniquely designed for project-based organizations. We’re on our way to 150 implementations of it at this time in R&D-Product Development. It is designed to be compatible with any and all CEO/CXO metrics reporting frameworks, including Balanced and other scorecards.

The August Issue of Machine Design

The August 2016 issue of Machine Design, without mentioning the LMP framework itself, addresses the subject of measuring R&D and Product Development “Productivity” in the context of the four groups of “primary metrics” that comprise the LMP. Each of the four groups is a bold sub-heading in the article.

This blog post also includes the word “Efficiency.” Measuring R&D and Product Development Efficiency means the same thing as measuring Productivity. Both words equate to Output divided by Input.

Note To Rocket Scientists: Yes, I am aware that some invoke the capital/physical assets of the company into productivity measures. And, when capital is weighted as part of the input to the output, that does change productivity to mean something different than pure efficiency.

PS: We are proud to add, as a closing note, that our 20th R&D-Product Development Metrics Summit is on the horizon on October 18-20, 2016 in Norwood, MA. New England is beautiful in the fall. We are sure to positively affect your thinking on measurement.

As you will see in the August MD article above, our LMP stays in the background for the Summit as well. We focus on the metrics and sets of measures that best align with a company’s chosen R&D strategy; and get at subjects that are hard to measure. Please consider joining us.

The product-definition era ended 15 years ago. As software and the internet began to take over the world, both easier technologies to iterate to successful outcomes, up-front planning started to take a back seat.

As a whole, society began to change as well. Critical thinking was gradually replaced by rapid doing. As 3D printing grew, making iterations faster for leading companies that could afford the quite expensive equipment, competitive advantages could be maintained.

Today, 3D printing is down the cost curve and is available to all companies and to individual Makers working out of their homes. The playing field is nearly level again. Everyone, large and small, can now quickly and economically make physical models. Soon, 3D printing will turn out saleable market-ready products.

Where does that leave us? It seems we are about to go back to the future, defining the right product. As we head to a future that again emphasizes definition, both science and technology advances will be on our side.

This blog post is addressed to my old and new friends in the country of Poland, and to those around the globe that may have an interest in doing business in Poland.

Earlier this year, I was invited to keynote a conference focused on the emerging R&D industry in Poland. Historically an agricultural and manufacturing economy, with a great deal of natural resources in the country, Poland was the only EC country to avoid contraction in the Great Recession. Since 2010, Poland has been humming along at a 3.5% to 4.0% growth rate and reached a GDP of $555 billion last year. Filled with scientific and technical universities, and citizens eager to bring their country to the forefront of able global competitors, Poland’s government and companies are stepping up their game to compete in research and development. Momentum has been building for several years now and the word is getting out.

TECHBRAINERS Sp. z o.o., an emerging powerhouse in open innovation in Poland, sponsored what perhaps was the first countrywide conference exclusively tailored to corporate R&D professionals last year. Company leaders had evidently been following GGI’s work and my writings for some time, and invited me to join them last week on April 14th for their second annual R&D Summit in Warsaw to talk about trends in organizing and managing research and development.

In preparation for the conference, I spent some time researching the country’s position on the global stage. Utilizing resources from several places, including R&D Magazine’s recently published “Global R&D Funding Forecast,” I was able to get a good picture of the country’s relative global position in R&D capabilities. Already surpassing the Netherlands, and now nearly equivalent to Belgium in desirability within the EC, Poland is positioned to make a splash in the years ahead.

On absolute dollars of R&D spending, Poland ranks 27th on the globe. Currently, 60% of their economy is household consumption and another 20% is fixed capital formation. Government spending accounts for 18% of the economy and 2% is miscellaneous. Exports only slightly offset imports according to tradingeconomics.com, adding only 1% to GDP. And, therein lies an opportunity for the future.

The conference was well attended and included professionals from Poland, Germany, Luxembourg, Belgium, Ukraine, UK, and Australia.

INN POLAND, a well regarded business and social media web site that practices journalistic standards, invited me to their offices for a meeting. Their interest was to discuss possible future scenarios for Poland’s emerging research and development capabilities, especially opportunities to export. I took a risk and offered my thoughts on one great opportunity that I had been thinking about that seems to be well within Poland’s reach; given their natural resources, current industrial progression, and physical location on the globe.

The article is written in Polish. For my English speaking colleagues, and not speaking Polish myself, I ran the article through a web-based translator. While far from perfect, the English Version is suitable to gain the essence of my conversation with Aleksandra Ptak of INN POLAND.

There are lots of trends and new ideas when it comes to the science of managing R&D. Some got started when a technological advance changed the best way to manage or make decisions. Others arose from new thinking in management science in the light of macro changes taking place in business and political structures, practices, and economics.

Twelve trends were addressed in this two part series that ran in January and February 2016 in Machine Design magazine.

At the Editor’s request, we have added a capstone article in the March 2016 issue entitled “Perspectives.” In this third and final piece, additional thoughts are offered on each trend and some of the interplay between trends is discussed.

As you consider each trend, keep “Big Data” in mind. It is a “macro trend” that will affect every industry and segment of the globe. It underlies more than half of the trends discussed, and, to a lesser extent, it will affect all 12. As an exercise, give some thought as to whether each trend is technology-driven or thinking-driven. In some cases, it’s both.

The 12 trends relating to the science of managing R&D are in the following twelve business and/or functional areas.

Trend 1. Rapid Prototyping (aka 3D printing)

Trend 2. Strategy

Trend 3. Product Definition

Trend 4. Organic Innovation and Growth

Trend 5. Search and Synthesis

Trend 6. Core and Functional Competencies

Trend 7. Engineering and Development Automation

Trend 8. Micro-Nano Effects

Trend 9. Physical vs. Virtual Work

Trend 10. Measurement and Correlation

Trend 11. Open Innovation

Trend 12. Intellectual Property

Here are the previously published Part I and Part II articles covering the 12 trends.

NEEDHAM, Mass. — (PRJ) — February 11, 2016 — The corporate quest to master innovation began in the 1990s. Prahalad, Hamel, Moore, Utterback, and Christensen’s writings seeded the field. In 2004, Business Week published its first ranking of the “The World’s Most Innovative Companies” and the innovation race was on.

For two decades now, the innovation body of knowledge has been both growing and refining. Models and frameworks by esteemed companies, consultancies and research firms have come and gone; as have about half of the initial providers of enabling techniques and software. Of course, what worked has remained.

Most companies are quite lean these days and only a few markets are growing rapidly. Future growth and profit will largely result from having a better product portfolio than one’s competitors. There is little fat left to cut. The mastery of innovation is essential to gain competitive advantage in the years ahead. Today’s ability to monetize and trade intellectual property (IP) assets now makes both products and their IP transactable commodities, furthering the importance of innovation.

GGI held our first Innovation Summit in January 2006. Each year we take a fresh snap shot of the state-of-practice across strategies, tactics, techniques, tools, software, and metrics. Our program focuses on the needs of CXOs, managers, and thought leaders to direct and enable innovation in their companies. Some five hundred companies have participated. Many initial participants rejoined us five and seven years later for a fresh update. You will meet some of them if you decide to register.

GGI’s 14th R&D-Product Development Innovation Summit will be held March 29-31, 2016 in Norwood, Massachusetts. Norwood is half way between Boston and Providence, providing participants with two airport choices to best their travel expenses. Group rates are available at our Four Points Sheraton Inn & Conference Center.

This information intensive event draws on our thirty years in business consulting to Fortune 1000 companies, findings from over fifty secondary research sources, and fifteen years of our own primary research on product development, innovation, IP, and metrics. Our six hundred-page color course book cites all references and enables participants to follow-up on their specific interests when they return to their offices.

Our Summit delivers the goods to update executives and professionals on the state-of-practice, and provides the empowering knowledge that is needed to increase corporate product portfolio and brand value from innovation and IP improvements in their companies. Many participants have said, “GGI’s Summit is the equivalent of an Executive MBA on Innovation in three days.”

There are lots of trends and new ideas when it comes to the science of managing R&D. Some got started when a technological advance changed the best way to manage or make decisions. Others arose from new thinking in management science in the light of macro changes taking place in business and political structures, practices, and economics.

Twelve trends are addressed in this two part series in Machine Design magazine. As you read through the trends, keep “Big Data” in mind. It is a “macro trend” that will affect every industry and segment of the globe. It underlies more than half of the trends discussed, and, to a lesser extent, it will affect all 12. As an exercise, give some thought as to whether each trend is technology-driven or thinking-driven. In some cases, it’s both.

The 12 trends relating to the science of managing R&D are in the following twelve business and/or functional areas.

If the opportunity to discuss these trends in person sounds appealing, please consider joining us at GGI’s 14th R&D-Product Development Innovation Summit on March 29-31, 2016 in Norwood, Massachusetts. We will also be featuring new industry research on the emerging specific types of Disruptive Innovation.

There are lots of trends and new ideas when it comes to the science of managing R&D. Some got started when a technological advance changed the best way to manage or make decisions. Others arose from new thinking in management science in the light of macro changes taking place in business and political structures, practices, and economics.

Twelve trends are addressed in this two part series in Machine Design magazine. As you read through the trends, keep “Big Data” in mind. It is a “macro trend” that will affect every industry and segment of the globe. It underlies more than half of the trends discussed, and, to a lesser extent, it will affect all 12. As an exercise, give some thought as to whether each trend is technology-driven or thinking-driven. In some cases, it’s both.

The 12 trends relating to the science of managing R&D are in the following twelve business and/or functional areas.

Although PLM emerged in 2001, those who work in the PLM field know that, even in 2016, it’s far from fully implemented. They may wonder how long widespread full acceptance and implementation of the PLM paradigm will take, and ask, “When will PLM become the norm?”

The author, John Stark, is a subject matter expert in all things related to Product Lifecycle Management [PLM]. For three decades, John has published the bi-monthly 2PDM and now 2PLM ezine from the PLM Institute located in Geneva, Switzerland. In a recent article, published on January 14, 2016 in LinkedIn Pulse, John explores the fifteen years (and counting) time frame relating to industry’s adoption of PLM.

Brad Goldense is quoted several times in this article relating to GGI’s position on the length of time it takes new bodies of knowledge to evolve and mature.

When will PLM become the Norm?, takes a look at what has happened in PLM since 2001 and hypothesizes how much longer it may take to achieve widespread industry adoption of PLM capabilities.

Intestinal fortitude for innovation is on the decline in most industries. The lackluster economy has made many companies skittish to embrace risk in their product portfolios. How bad has it become? In the 1990s, almost 60% of R&D budgets were allocated to New-To-The-World, New-To-The-Market, and New Product Lines (Robert G. Cooper, Reference Paper #46: Creating Bold Innovation In Mature Markets). Today, that number is below 40%.

Nielsen recently did a study of innovative products (Taddy Hall and Rob Wengel, Nielsen Breakthrough Innovation Report: June 2015). Nielsen examined 3,522 initiatives and identified 12 “Breakthrough Winners.” Ten of the winners were edibles of some type. Other winners included Duracel’s Quantum battery and Paris’ Advanced Haircare from L’Oreal. What happened to all the other categories of products you and I buy? For the time being, the innovation tent has been rolled-up in most industries.

Alas, 30 years of corporate focus on the bottom line has left many companies challenged when it comes to attacking top-line initiatives with confidence (The Journey To Mastering Innovation, Machine Design, November 2015). How will companies overcome the current conundrums of flat to small revenue growth and shrinking profits that have been pervasive for the past few years? Perhaps “roadmaps” might help instill the confidence necessary to once again take on additional risk.

In a recent article, I discussed the need for companies to manage four distinct but integrated portfolios. The best practice is to use four multi-year roadmaps, of the same names, to create those four portfolios.

It may be surprising to learn that many engineers with great talent and a depth of experience have a hard time answering questions regarding the type(s) of manufacturing environments that exist in their company. Hopefully, this article will help practitioners to better categorize what often appears to be shades of gray.

Most manufacturing environments fit into one of five general categories: Repetitive, Discrete, Job Shop, Process (batch), and Process (continuous).

In the diagram below, each letter represents a different product. “White space” indicates set-up, tear-down, or a changeover activity of some type. Product is not being produced when there is white space. Some white spaces take longer than others. The white space time depends on both the clean up time for the product just produced and on the preparation time for the next product to be produced.

Most companies use more than one of these environments to get a single product out the door. This is certainly true if one includes today’s use of the supply base, versus the historical practices of vertically integrated companies. One of the factors that drove the outsourcing movement was that vertically integrated companies often had all five environments in house, and the associated expense to maintain proficiency across this broad spectrum.

In the 1990s, life was simple. Marketing, or Product Management, maintained the “product portfolio.” In the largest companies, there was perhaps also a technology portfolio. The “R” part of the R&D organization would work with marketing to plan future products based on the projected availability of technologies still in development. Today, having both a technology and a product portfolio is considered the rock-bottom minimum regardless of company size. Just about all companies actively maintain these soft assets—only the degree of formality differs.

Over the past decade, these portfolios became more closely tied together with the advent and acceptance of roadmapping (which charts the path new technologies and products take as they evolve into commercial readiness). In between each and every portfolio snapshot in time, the roadmap provides guidance on the activities needed to reach the portfolio’s next incarnation.

It would be great if we could just call it a day with two portfolios and the roadmaps that tie them together. But that is no longer best practice. We now also need a project portfolio and an intellectual property (IP) portfolio to be a best-practices company.

Project Portfolio: The need for project portfolios has been partially driven by the tremendous growth in project managers and project management organizations. These now-large organizations need to prioritize and sequence their inventories. There are other equally important reasons.

IP Portfolio: The need for IP portfolios has been partially driven by the increasing ease of monetizing intellectual property as a commodity , in replacement of or in addition to including the IP in products for commercial sale. There are other equally important reasons.

There are two fundamental categories of post-launch reviews. The first we shall call “Team Self-Assessment Project Reviews.” These reviews are primarily for product developers to explore their lessons learned from working together on a project that has just completed. The second we shall call “Management Business Reviews of New Products.” These reviews are primarily for management to explore the financial and marketplace results of the new product in both a relative and absolute sense, and to contrast the results to those that were promised when the project was approved.

Ideally, there is minimal overlap in the content of the two review categories. However, and this is especially true where the team that created the product stays together to enhance and service the product during its life cycle, much of what should be covered in structured Management reviews is often done in Team reviews.

Consider that management makes the business decisions. They could invest scarce R&D funds in many places. They choose to invest in certain projects because of the business plan that was presented to them, or sometimes just plain old gut feel. If management does not involve themselves in a comparative analysis of promised vs. actual results, they diminish their capability to “see” similar or analogous estimating shortfalls in future business plans and decisions. The learning loop does not get closed for management.

Manufacturing and operations professionals, in just about every company these days, have achieved closed-loop decision-making. The opportunity is still on the table for most engineering and product development operations and organizations to do this better.

In R&D, outcomes for the project are not always the same as the outcome for the product. One could execute a great project, but the marketplace does not get excited about the resultant product(s). Alternatively, one could execute a highly inefficient and prolonged project, but the resultant product(s) turns out to be a home run. The important thing is to know about both the project and the product results, to position the organization to become ever better in the future.

As well, outcomes are not always clear. Some times they are neither a success nor a failure, but are somewhere in between.

There are new techniques and metrics just introduced by McKinsey and CFO Magazine, and an industry-generated metric from Broadcom entitled “R&D Efficiency,” during the spring of 2015. They all focus on measuring overall R&D productivity, output over input. One of them has a good chance of becoming mainstream in the next five years, just as Return On Innovation (early 2000s) and the Vitality Index (1988) did. As well, there has been the equivalent of a sea change in the metrics companies use since the market crashed in 2008. It became evident in 2013 and is ongoing. Did you reorient your metrics, by about 25%, towards business and financial output in the past five years?

This Summit covers everything an executive needs to know relating to measuring R&D, Advanced Development, Product Development, Innovation, Technical and Functional Competencies, R&D Productivity, and R&D-related Intellectual Property. We will connect the numerous metrics going three levels deep into the R&D-Product Development organizations to the handful of KPIs needed by the CEO for financial reporting and investors in a single one-page portfolio.

The selections of metrics are different for every company, and highly strategy dependent. You get what you measure. Don’t worry, you’ll get to include any of the metrics you measure today in your final workshop solution. GGI is consistently told by leaders, who enter believing that they have strong metrics, that they have a great many things they are going to discuss doing and undoing when they get back to their office.

GGI has been a recognized thought leader in measurement since the early 1990s. We have introduced more than a handful of metrics that companies use today. We have played a role in making a number of great metrics, created by others, become mainstream across industries. For eighteen years we have done primary research on corporate, project, technical, functional, innovation, productivity, and IP metrics being adopted by corporations. For twenty-five years we have kept our finger on the pulse of what is being done by others, and on emergent metrics that haven’t significantly penetrated industry (yet). This enables participants to determine a competitive advantage set of KPIs and their necessary supporting measures. Our Summit is as close as you will get to internalize the metrics body of knowledge in a single event. Every Summit is current.

Senior executives wishing to put themselves and their colleagues in a better position to direct and drive product creation and commercialization should strongly consider attending. Many participants have said, “this Summit covers everything an officer or senior manager needs to know on the subject of Metrics.”

Does your R&D organization have closed-loop decision making? If not, increasing the robustness of your post-launch reviews may help.

Manufacturing and operations professionals, in just about every company, have achieved closed-loop decision-making over the past three decades. When the yield of any work center is lower than expected, engineers track down the root causes and fix them. At the business level across the entire factory, when there is not enough finished goods inventory on hand and orders are short shipped, management tracks down the root causes and fixes them. The opportunity to do the same is still on the table for most managers and executives who direct engineering and product development professionals and organizations.

The yield of a work center is a much different animal in product development so let’s not address engineering work centers at this time. However, at the business level across the entire product development organization(s), there are several opportunities to improve both the development team’s and management’s ability to learn from the project/product and better decision making the next time around.

A “project” is a temporary organization vehicle used to develop new products. Companies don’t sell projects; they sell products that result from projects. Team reviews should have a heavy project emphasis. Management reviews should have a heavy product emphasis. Of course there is overlap, but it is not that difficult to draw a fairly clean line as to what in a product should be part of a team project review and what in a project should be part of a management product review.

Does your company tightly control its manufacturing operations and work centers? If so, each work center is measured and the company knows exactly how much good and bad product the center produces. These figures are the center’s “yield.” Of course, companies aim for 100% positive yields from each center. And, products which have been manufactured for a long time often approach that ideal.

Now, let’s take this same basic concept of a center’s yield and apply it to product development. There are series of centers that take new product concepts and bring them to market. But for these, 100% yields are not expected, nor would we wish them to be. Product development is much more probabilistic. Not every product brought to market is expected to be a financial success. If it were, innovation would dry up as companies would take no risks.

Many studies over the past five decades have found that somewhere between 35% and 55% of products are not financial successes. That figure can be as high as 90% in high-tech and consumer products. Those high failure rates create an opportunity to improve yield without risking the loss of innovation.

New Product Pipeline Yield Example

There are opportunities in most companies to get more revenues and profits from the product pipeline without increasing investment or headcount. Those opportunities have one common element, better decision making.

Maximizing Revenues from the New Product Pipeline[Machine Design – May 2015] discusses decision making in corporate environments that have too many ideas to choose from, too few ideas to choose from, and the financial results of both good and bad pipeline management. Bettering management of the pipeline often results in double digit percentage increases in revenues and profits from new products.

Has your company been around for a long time? Did your products start off as purely mechanical, then evolve to electro-mechanical, then to electronic, and are now software-driven hardware? Are the historical underpinnings of your testing and quality organizations rooted in manufacturing operations and validating physical products? If so, then rebalancing the test suite may shorten your time-to-market.

Rebalancing a test suite is not easy. It requires much thought and patience, and it is not inexpensive. But lengthy time-to-market is also not inexpensive if the revenue streams of all products could be brought forward a number of weeks or months. ROI justifications are unique to each company. So, rebalancing will be worth it for some firms and not others.

NEEDHAM, Mass. — (BUSINESS WIRE) — March 23, 2015 — GGI will be holding our 19th Summit on Metrics for corporate, business, research, and product development executives during the last week of August at the Four Points by Sheraton – Norwood Inn & Conference Center. The location of all GGI Metrics Summits, this conference center is conveniently equidistant between Boston and Providence airports.

The 19th Summit consists of two seminars, and a workshop that is interspersed with micro seminars. In three days, we will cover the wide range of topics necessary to comprehensively measure corporate investments in research and development. The culminating workshop will result in a take home draft, using GGI’s Linked Metrics Portfolio™ method, of a portfolio of metrics that measure three levels into R&D and produce a handful of metrics for the CEO’s needs. Numerous corporations use our approach that meets the specialized needs of project-based environments while producing business-level metrics that feed into corporate scorecards and financial statements.

Tuesday focuses on the hardest to quantify corporate innovation measurement issues: Risk & Complexity, Hurdle Rates, Trade-Off Analysis, Capacity & Pipeline Management, and the few Metrics that capture the financial performance of R&D as a whole. It concludes with a review of the Top 101 metrics that corporations use to oversee their R&D investments.

Wednesday morning we generate “Proactive” forward-looking R&D metrics to guide the culture of the innovation environment. Discussion then switches to early metrics that are “Predictive” of the outcomes of R&D investments.

The Workshop begins in the afternoon and continues Thursday. Participants organize into teams based on the commonality of their corporate R&D strategy. A common strategy is more important than a common industry at the financial reporting level of corporations. Innovator, Platform, Balanced, and Follower strategy metrics differ. Teams determine their “must have” metrics. Then, a series rounding-out topics are interspersed into the workshop. These micro seminars cover metrics for Applied Research, Advanced Development, Intellectual Property, Technical & Functional & X-Functional Disciplines, Software, and Supplier Management.

The Summit wraps-up with team presentations of their draft Metrics Portfolios, and their explanations on how their metrics support their chosen R&D Strategy. A discussion on Implementing Metrics concludes the event.

• • • • • • • • • • • • • • • • • • • • • • • • • • • • •

NOTE: Inadvertently, the actual Business Wire press release title was issued with the dates August 27-29. The correct dates are August 25-27, Tuesday to Thursday, as the title in this blog post correctly indicates.

Strategy is a wonderful word. It sounds great in meetings, as does its adjective form, strategic. Everyone’s mind snaps to attention the moment either word is used. Then everyone nods, saying we have got to have the right strategy. And if some plan is called strategic, then we must certainly do it.

Management and consultants throw the s-word around casually all the time. Too much of the time, these folks are actually talking about tactics; or even worse, operational levels. There are instances in which both tactics and operational items are strategic. But, usually they are not.

Certain companies and service firms do understand how to create strategies and then put them into effect. People who have worked for those companies see it immediately and their thought processes are changed for the rest of their careers.

Product road maps and product portfolio strategies, and their enforcement, are important. The only companies that systematically prosper without a good portfolio strategy either out-service their competition, sit at the top of the heap in operational excellence and cost management, or are lucky enough to be in a high-growth industry where management can do no wrong.

Are all new product ideas ready to go into your company product development process? Certainly not! For some products, the technical and feasibility risks are still too great to have any hope of estimating an accurate schedule. But other products, that are deemed feasible but may entail market risk, are immediately put into a product launch timeline and the chips left to fall where they may for commercialization.

Do Your New Products Sell Like Hockey Sticks?[Machine Design – January 2015], addressed numerous scenarios in which products do not get purchased for a number of months after their launch. This “no or low sales period” puts a drag on a company’s development culture and extends the time frame to meet a product’s financial goals. One of the causes of hockey stick sales is not addressing the need for market development for certain products.

While some market-related scenarios are hard to avoid, like capital budgeted products that must wait for “funded years” to start, many product launches with no or low sales can be avoided. At the least, they can be mitigated.

Decision makers are much better at identifying products that need additional technology development than they are at identifying products that need additional market development.

Have you heard the term “hockey stick sales” before? This means that there are relatively few sales right after launch. Then, some weeks or months later, sales start to increase. The blade of the hockey stick represents the flat sales period, the handle represents the rise [Figure 1].

Figure 1

New Product Launch With “Hockey Stick Sales Curve”

Hockey-stick sales reduce developer satisfaction as market acceptance is delayed. They also slow down company sales and profits while giving customers pause for thought as they wait for others to take the plunge. The best business hockey stick has no blade, only a handle.

Heads up, but don’t panic. It will be a while yet before something lands on your desk to which you will be asked to conform. But, an initial rail car has been put on the tracks and it is leaving the station.

Innovation is a relatively recent front and center corporate focus, right around a decade at this time. How can standards possibly be set, or even in development just yet? The truth is, innovation has been a subject of study and analysis for the past five decades. Best practices are currently being culled out, and many are nearing the ready point to enter the corporate mainstream.

Edward DeBono’s first book “The Use of Lateral Thinking” was published in 1967. By the 1980s, a number of large companies had used the “Lateral Thinking®” technique. There were enough positive results from the approach that corporations wanted more alternatives. Leading thinkers saw the opportunity to service an emerging market for innovation. Roger von Oech’s created his “Creative Whack Pack™” in 1989. This deck of sixty-four cards in four suits, four fundamentally thinking approaches, also gained corporate traction. There were only a handful more of “early providers” in this time frame, but corporate experiences were sufficient to make the case that innovation levels could be improved by external service providers.

Henry Chesbrough published his first work on “open innovation” in 2003. This seminal work opened up the traditional domain of innovation from being an internal-to-the-company initiative to making any and all things possible to better enable a company’s ability to innovate. When Boston Consulting Group teamed up with Business Week in 2004 to rank the most innovative companies on an annual basis, and companies could see their market cap rise or fall based on their movement in this annual list over the next several years, the innovation market took off. What resulted was a critical mass of companies that now wanted external tools and influencers to help themselves get better at innovating. Sufficient money could now be made servicing corporate demands. By 2008, GGI identified some two hundred seventy-five tools and/or service offerings available to corporations for the purpose of improving creativity and innovation [MD August 15, 2013]. Many of these offerings were from newly formed companies.

Innovation functions have been increasingly measured in business terms since the late 1980s, but the balance of the Top 25 KPIs remained internal to the function and were not business-focused. In 2008, the balance became roughly even. In 2014, the balance tipped. Industry now measures the product portfolio as it evolves in the pipeline with ten metrics that span end-to-end. Three metrics measure ROI, IRR, NPV, or Payback. Three metrics measure revenues.

In addition, there are two measures of new product profits. Average First-Year Profits of New Products joined Percent of Profits From New Products. Both profit measures have been steadily rising in their adoption since the early 2000s. Prior to 2000, profit measures were not present in the Top 25. Perhaps the hardest KPI to accurately measure, this finding indicates that companies have increased their depth of understanding regarding their hard to quantify innovation functions.

The final seven measures focus on internal management of R&D, such as: Time-To-Market, Development Cost, R&D Spending, and measures of Headcount.

Movement in the remaining 75 metrics over GGI’s six studies indicates that measures of Intellectual Property (IP), Licensing, and IP Revenues and Profits will likely displace some of the current Top 25.

R&D still lags other business functions in its cross-industry measurement equivalency. Only seven KPIs are common across more than 40% of industry, and only fourteen KPIs are common across more than 30% of industry. KPI #25 is common across only 17% of industry. In comparison, other functions may have 70% or more KPI equivalency across industries.

This 18th Summit will provide participants with the best metrics for their individual companies across industries to drive R&D and Product Development productivity, output, effectiveness, and efficiency. You will wrap your arms around the metrics that investment firms and Wall Street analysts are increasingly interested in regarding new product sales, value of the pipeline, time-phased portfolio value, company innovativeness, and innovation conversion rates to real products that launch. Make no mistake, this Summit is geared for top folks chartered with leading and getting results from innovation in all its manifestations. If you look at the written testmonials from our Summit participants, and the positions that they hold, it is clear that GGI’s Summit delivers the value and content that executives charged with running complex R&D operations need to be successful.

Our twenty-eight years as a corporation serving North America and Europe, along with our statistically valid primary research conducted over the past fifteen years, brings depth and executive perspective this 18th Summit. We know the Top 100 Metrics that are the most used by corporations, and how they have changed over time. On March 13, 2014 GGI published our 6th North American study of R&D and Product Development practices in the areas of R&D Operating Environments, Organic Innovation, Open Innovation, Intellectual Property, and the Top Corporate R&D Metrics In Use. Two-hundred companies from the USA, Canada, and Mexico participated in numbers that represent the relative R&D spending of the North American countries. There is no more current information anywhere on the industrialized continents in 2014. Participants in our 17th Summit earlier this year attested to this. Again, GGI Summits are delivered from the prospective of C-Level executives who have overall responsibility for getting results and/or interfacing with external analysts.

During the first two seminars of the Summit, we will discuss the usable and practical part of the Body of Knowledge of R&D and Product Development Metrics that CXOs can put to work for their companies. The first seminar, the first day, focuses on the hardest to measure operational areas including: capacity management, how to make trade-off decisions, hurdle rates, portfolio risk and complexity, overall returns from R&D investments, and the number of metrics a company should have to manage R&D from a CXO and then CEO level. The second seminar, the next morning, focuses on planning, proactive, and predictive metrics that enable one to see ahead of actual results to enable a performance environment and culture that will produce superior results.

The third seminar of the Summit is best described as a Workshop, but it will include new material on rapidly evolving measurement areas in R&D. Participants will break into working groups to apply their experience and new learnings of the past two days to create “a set of metrics” suitable for measuring all aspects of R&D — including Projects, Technical & Functional Disciplines, Improvement Initiatives, and most importantly the overall CXO-Level metrics for R&D that are used by the President, CEO, and investor community. There will be several focused discussions during the Workshop on specialty metrics for Advanced Development, Functional/Technical Competencies, Intellectual Property & Licensing, and several other measurement topics that are rapidly entering the mainstream.

Senior executives wishing to put themselves and their fellow senior executives in a better position to direct and drive product creation and commercialization should strongly consider attending. The great majority of our prior participants will say, “this Summit covers everything an Officer or Senior Manager needs to know on the subject of Metrics and how to deploy them.”

The July 7, 2014 issue of 2PLM introduced the scope and focus of recent Goldense Group Inc. (GGI) research on R&D Operating Environments, Organic Innovation, Open Innovation, Intellectual Property, and “The Top Corporate Metrics used to measure R&D and Product Development”.

At GGI, our goal in each primary research effort during the past fifteen years has been to focus four areas of the research effort on emerging new practices, or on rapidly evolving or changing existing practices, to learn rates of change and/or growth.

In our recent research effort, the “2014 Product Development Metrics Survey”, the four topics of R&D Operating Environments, Organic R&D Innovation, Open R&D Innovation, and R&D Intellectual Property Practices were chosen as they satisfy those parameters. In addition, they are having an impact on the R&D metrics that corporations use.

In this sixth and final piece of the six part series, the research purpose is more akin to benchmarking than to discovering new and changing industry practices. In each research effort of the past fifteen years, our researchers have presented a list of the “metrics that CXOs are most likely to use to oversee R&D output, productivity, effectiveness, and efficiency.” Respondents are asked simply to put a check mark next to any metric that is generally part of management team and corporate reviews. The “Most Frequently Used Corporate R&D Metrics” results from tabulating the responses. The list of metrics is far from static over the past fifteen years.

2PLM is a bi-monthly publication by John Stark Associates [JSA], based in Switzerland. JSA is focused on the body of knowledge of “Closed Loop Lifecycle Management (CL2M).” JSA and GGI have collaborated on various projects spanning three decades, including GGI’s primary research initiatives.

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A note on GGI primary research initiatives:

The six GGI primary research initiatives during the the past fifteen years may be found at GGI’s Primary Research site.

The 2014 primary research, entitled the “2014 Product Development Metrics Survey”, was conducted by sending questionnaires to a wide range of companies developing products throughout North America. Participating companies had headquarters throughout the Americas, Europe, and Asia, but their response was for North American R&D-Product Development operations. Complete data sets were received from 200 companies. Consumer, industrial, medical, chemical, and automotive/vehicular products were the top respondent industries. Participants completed 31 questions across the five primary research subjects. The research period was September 2012 to October 2013. The results were published March 3, 2014 in a 138-page report. This research is statistically valid and provides a Margin Of Error for each research question.

In the July 7, 2014 issue of 2PLM, the scope and focus of recent research on R&D Operating Environments, Organic Innovation, Open Innovation, Intellectual Property, and the Top Corporate Metrics used to measure R&D and Product Development was described. The July 21, August 4, and August 25 issues issues addressed the industry research findings regarding R&D Operating Environments, Organic R&D Innovation, and Open R&D Innovation respectively.

In this fifth of a six part series, selected GGI findings on Intellectual Property practices in R&D will be discussed. Intellectual Property [IP], for the purposes of the research, included both registered and unregistered IP associated with R&D. Company Proprietary, Trade Secret, Enabled Publications, Copyright, Trademark, Provisional Patent, and Patent were generally the categories that respondents had in their minds as they addressed eight research areas spanning R&D and the general management of IP.ources, excluding the use of contracted personnel to supplement employee-equivalent responsibilities.

Four IP areas relating to R&D and PLM were researched: Importance of IP, Financial Tracking of IP, Financial Results from IP, Processes Used To Manage IP. Over 95% of all respondent companies provided answers to these four research areas. As “IP” has been around for centuries, and registered IP began in England in the Middle Ages, one would expect a high level of corporate awareness on the subject of Intellectual Property.

2PLM is a bi-monthly publication by John Stark Associates [JSA], based in Switzerland. JSA is focused on the body of knowledge of “Closed Loop Lifecycle Management (CL2M).” JSA and GGI have collaborated on various projects spanning three decades, including GGI’s primary research initiatives.

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A note on GGI primary research initiatives:

The six GGI primary research initiatives during the the past fifteen years may be found at GGI’s Primary Research site.

The 2014 primary research, entitled the “2014 Product Development Metrics Survey”, was conducted by sending questionnaires to a wide range of companies developing products throughout North America. Participating companies had headquarters throughout the Americas, Europe, and Asia, but their response was for North American R&D-Product Development operations. Complete data sets were received from 200 companies. Consumer, industrial, medical, chemical, and automotive/vehicular products were the top respondent industries. Participants completed 31 questions across the five primary research subjects. The research period was September 2012 to October 2013. The results were published March 3, 2014 in a 138-page report. This research is statistically valid and provides a Margin Of Error for each research question.

If capacity and throughput in Manufacturing and Production is accurately quantified as “equipment assisted by people,” then R&D and Product Development is accurately quantified as “people assisted by equipment.” Paying attention to the specific activities that are required of development professionals is a key contributor to R&D productivity and throughput, more so than just about any function. R&D-Product Development headcount is a single digit percentage of the work force that is required to generate fifteen to sixty percent of near and intermediate term revenues. Time is a critical commodity.

Today’s product development process structures, many whose underpinnings date to times when digital simulation and testing were a very expensive commodity and there were far less computer models and illustrations on the shop floor, also bear a legacy of having test suites whose center of gravity and resultant corporate culture is after the product exists in physical form. As such, Design Reviews last almost up to product launch.

Thinking best practices, physical form is late. In physical form, one is answering a more reactive Quality Control question “does the as-built model conform to the requirements and specification?” If yes, phew. If no, as is usually the case, changes are required that can ripple through the entire supply chain. Changes certainly take engineering time. These are not really Design Reviews. Design reviews are reviews of design.

Analogous to re-balancing required pipeline activities to improve innovative thinking and new product creation potential, re-balancing a late center of gravity will also free time and energy for potential new product creation.

Design Reviews Reduce Time to Market[Machine Design – September 4, 2014] discusses how R&D-Product Development time can be saved by performing early and meaningful Design Reviews to help overcome legacy testing suites and a culture whose gravity is late into the process. An ounce of prevention is worth a pound of cure. Design Reviews result in a more productive, collaborative, and satisfied R&D-Product Development community.

NOTE: The article is currently posted. The MD September 4 magazine issue URL will enliven when the issue is published.

In the July 7, 2014 issue of 2PLM, the scope and focus of recent research on R&D Operating Environments, Organic Innovation, Open Innovation, Intellectual Property, and the Top Corporate Metrics used to measure R&D and Product Development was described. The July 21 and August 4 issues addressed industry research findings regarding R&D Operating Environments and corporate practices in Organic R&D Innovation.

In this fourth of the six part series, published on August 25, selected GGI findings on Open R&D Innovation will be discussed. Open Innovation [OI] is the ability of a corporation to invent and innovate using outside sources and resources, excluding the use of contracted personnel to supplement employee-equivalent responsibilities.

Open Innovation is a two way street. GGI coined “Inbound Open Innovation” and “Outbound Open Innovation” to segment the research. If a company looks to make its capabilities available to other companies that may have an interest, that is Outbound. If a company is looking to acquire innovation to supplement its own Organic R&D Innovation capabilities, or perhaps to repackage and sell acquired innovation, that is Inbound. This article focuses on Inbound OI.

Five Inbound OI areas were researched: Importance of OI, Financial Tracking of OI, Financial Results from OI, Corporate OI Approaches To Acquire Capabilities, and Processes Used To Manage OI. Over 95% of all respondent companies provided answers to these research areas. That, in itself, is an indication that this evolving body of knowledge is likely to have staying power in the years ahead.

2PLM is a bi-monthly publication by John Stark Associates [JSA], based in Switzerland. JSA is focused on the body of knowledge of “Closed Loop Lifecycle Management (CL2M).” JSA and GGI have collaborated on various projects spanning three decades, including GGI’s primary research initiatives.

The six GGI primary research initiatives during the the past fifteen years may be found at GGI’s Primary Research site.

The 2014 primary research, entitled the “2014 Product Development Metrics Survey”, was conducted by sending questionnaires to a wide range of companies developing products throughout North America. Participating companies had headquarters throughout the Americas, Europe, and Asia, but their response was for North American R&D-Product Development operations. Complete data sets were received from 200 companies. Consumer, industrial, medical, chemical, and automotive/vehicular products were the top respondent industries. Participants completed 31 questions across the five primary research subjects. The research period was September 2012 to October 2013. The results were published March 3, 2014 in a 138-page report. This research is statistically valid and provides a Margin Of Error for each research question.

In the July 7, 2014 issue of 2PLM, the scope and focus of recent research on R&D Operating Environments, Organic Innovation, Open Innovation, Intellectual Property, and the Top Corporate Metrics used to measure R&D and Product Development was described. The July 21 issue addressed R&D Operating Environments.

In this third of the six part series, published on August 4, selected GGI findings on Organic R&D Innovation will be discussed. Organic Innovation is the ability of a corporation to invent and innovate from within, including the use of contracted personnel to supplement employee-equivalent responsibilities.

Three Organic R&D Innovation areas were researched: Types of R&D Performed, R&D Processes for Pre-Product Development Innovation, and Product Development Processes. All three of these areas were researched thoroughly in our 2008 study enabling a pre/post great recession analysis.

2PLM is a bi-monthly publication by John Stark Associates [JSA], based in Switzerland. JSA is focused on the body of knowledge of “Closed Loop Lifecycle Management (CL2M).” JSA and GGI have collaborated on various projects spanning three decades, including GGI’s primary research initiatives.

The six GGI primary research initiatives during the the past fifteen years may be found at GGI’s Primary Research site.

The 2014 primary research, entitled the “2014 Product Development Metrics Survey”, was conducted by sending questionnaires to a wide range of companies developing products throughout North America. Participating companies had headquarters throughout the Americas, Europe, and Asia, but their response was for North American R&D-Product Development operations. Complete data sets were received from 200 companies. Consumer, industrial, medical, chemical, and automotive/vehicular products were the top respondent industries. Participants completed 31 questions across the five primary research subjects. The research period was September 2012 to October 2013. The results were published March 3, 2014 in a 138-page report. This research is statistically valid and provides a Margin Of Error for each research question.

In the July 7, 2014 issue of 2PLM, the scope and focus of recent research on R&D Operating Environments, Organic Innovation, Open Innovation, Intellectual Property, and the Top Corporate Metrics used to measure R&D and Product Development was described.

In this second of the six part series, published on July 21, selected GGI findings on R&D Operating Environments are discussed.

Four R&D Operating Environment areas were researched: R&D-Product Development Strategy, Importance of Innovation, Centralization vs. Decentralization, and Facility Deployment. Several of these areas were researched thoroughly in our 2008 study enabling a pre/post great recession analysis.

2PLM is a bi-monthly publication by John Stark Associates [JSA], based in Switzerland. JSA is focused on the body of knowledge of “Closed Loop Lifecycle Management (CL2M).” JSA and GGI have collaborated on various projects spanning three decades, including GGI’s primary research initiatives.

The six GGI primary research initiatives during the the past fifteen years may be found at GGI’s Primary Research site.

The 2014 primary research, entitled the “2014 Product Development Metrics Survey”, was conducted by sending questionnaires to a wide range of companies developing products throughout North America. Participating companies had headquarters throughout the Americas, Europe, and Asia, but their response was for North American R&D-Product Development operations. Complete data sets were received from 200 companies. Consumer, industrial, medical, chemical, and automotive/vehicular products were the top respondent industries. Participants completed 31 questions across the five primary research subjects. The research period was September 2012 to October 2013. The results were published March 3, 2014 in a 138-page report. This research is statistically valid and provides a Margin Of Error for each research question.

Penton Publishing has quietly been executing a corporate initiative across its featured magazines, the appointment of “Contributing Technical Experts.” GGI is pleased to share with you that Bradford L. Goldense, founder and president of GGI, has been appointed a Contributing Technical Expert for Penton’s Machine Design magazine.

Mr. Goldense has a B.S. in Civil Engineering from Brown University and an MBA from Cornell University. He holds four professional certifications: New Product Development Professional [NPDP] from PDMA, Certified Manufacturing Engineer [CMfgE] from SME, Certified In Production and Inventory Management [CPIM] from APICS, and Certified Computer Professional [CCP] from ICCP. Brad taught in the graduate engineering school, The Gordon Institute, at Tufts University for nineteen years. Mr. Goldense has consulted to over 250 industrial and high tech companies in over 700 manufacturing locations over his thirty-five year career. He holds over two-hundred registered copyrights. His work has been published by The Economist Group, Business Week, Industry Week, CFO Magazine, and numerous other trade publications. Goldense Group, Inc. [GGI], founded in 1986, is a consulting, market research, and executive education firm located in Needham, Massachusetts.

Innovation is Changing Pre-Product Development R&D[Machine Design – September 5, 2013] addressed the widespread growth over the past dozen years in industry innovation activities that precede product development. Historically, only companies in the life sciences industries and a handful of others commit significant resources prior to product development. Today, three-quarters of all companies have innovation and design resources engaged in development before they have defined products that go through product development processes.

In the late 1980s and early 1990s, industry aggressively sought to understand the correlation between product requirements and product outcomes. HP, IBM, Corning, Northern Telecom, Motorola, Analog Devices, and a few others led multi-faceted multi-year campaigns to understand the correlation. An article by Ashok Gupta in California Management Review’s Winter 1990 issue best captured the findings. In short, 71% of what goes wrong in product development can be traced to missing or incomplete or inaccurate requirements.

During these years, except for mission critical and complex systems requiring zero-defect or fail-safe outcomes, the responsibility for product requirements began migrating away from technical functions to marketing and product management organizations to improve corporate abilities to unilaterally focus on them. Product champions became the stars. The number of technical professionals involved in defining requirements gradually declined, as did their architectures.

Think about that 71% figure. It implies three out of four errors in product development are at least partially avoidable by good up-front planning and analysis. Younger readers may say, “looks like some old fogie is writing the article. We can be agile, rational, scrum, and sprint! And software is easier to modify, more flexible, and better all around.”

That’s all well and good, but the number of designs that are “spaghetti-like” in their architecture has been increasing. Requirements rarely ever arrive in a single package at the same time these days. Isn’t that necessary for a robust architecture? Sure the wizards get the rabbit out of the hat and make the product work, somewhat. But are we giving our companies and customers a best-in-class product? Missed, incomplete, and misinterpreted requirements are the ingredients that go into spaghetti architectures.

We should learn from history and ensure technical professionals again get heavily involved in the requirements definition and management process. We should emphasize strong relationships between product architecture, systems, and technical professionals, and the product or marketing organizations now responsible for defining requirements.

This Summit will provide participants with a snapshot of the evolution, current status, and projected future of R&D and Product Development Metrics as viewed from the top of corporations.

During the first two seminars of the Summit, we will teach the Body of Knowledge of R&D and Product Development Metrics — with a focus towards the measures that company Officers and Senior Executives need to manage the organization and its performance as a whole. The first one-day seminar is dedicated to focus on the metrics for decisions and issues that Officers and Senior Executives face in directing and measuring overall performance and entire organizations. The three most adopted industry metrics of the past decade will be discussed, along with a number of other all-in-one metrics: 3M’s “Vitality Index,” the emergent “Return On Innovation” metric, and the rejuvenated “Return On Capital.” Capacity, pipeline and portfolio management, hurdle rates, risk, and trade-off analysis discussions round out the first day. The second seminar, a half-day concluding with an early afternoon luncheon, is dedicated to “proactive” and “predictive” metrics. Proactive metrics lower the risk of R&D investments before they are approved. Predictive metrics improve the ability to foresee the execution and financial outcomes of approved investments.

During the third and final seminar of the Summit, participants will break into working groups to create a “set of metrics” suitable for managing and monitoring R&D and/or Product Development organizations as a whole — including Projects, Technical & Functional Disciplines, Improvement Initiatives, and the overall Corporate Performance of R&D. Applied Research and Advanced Development organizations are easily accommodated as well in a single integrated framework, for companies with multiple development organizations. The Linked Metrics Portfolio® approach, preferred to the Balanced Scorecard for managing R&D and Product Development, will frame the exercise.

Senior executives wishing to put themselves and their fellow senior executives in a better position to direct and drive product creation and commercialization should strongly consider attending. Several of our prior participants have said, “this Summit covers everything an Officer or Senior Manager needs to know on the subject of Metrics.” GGI, a 28-year old company, has been recognized as a thought leader and practitioner in this field since the early 1990s.

Finally, and this is not true of all GGI Metrics Summits, GGI published our 6th North American study of R&D and Product Development practices in the areas of R&D Operating Environments, Organic Innovation, Open Innovation, Intellectual Property, and the Top Corporate R&D Metrics In Use on March 3, 2014. Two-hundred companies from the USA, Canada, and Mexico participated in numbers that represent the relative R&D spending of the North American countries. It will be difficult to find information that is more current to augment the practical nature and usable outcomes of this 18th Metrics Summit.

Each GGI research effort has five focus areas. We try to get at what we see or know to be emerging trends to determine if they will become generally adopted, or if they will fizzle out. Advisors always wish to bring novelty and sizzle to their clients. GGI’s research gives us additional confidences, yea or nea.

The first four research areas explored changes to the environment and processes of organic R&D, open innovation, and intellectual property. Several of our thirty-one questions enabled five and ten year snapshots versus our prior research; and enabled comparisons of pre and post great recession practices. These four areas are not on the subject of Top 5 Industry R&D-Product Development Metrics. In short, innovation infrastructure is actively being built while the mix of corporate product portfolios clearly have less risk. Seemingly, corporate control from inception to launch has is probably best yet. There is little R&D sandbox left that is not overseen with some sort of milestones. New-To Innovation? IP is growing in personnel, but most infrastructure appears to be delivered by outside services. As well, integration with the general employee population seems slow compared to the continued growth in IP market dynamics.

The fifth and final research area has remained consistent for fifteen years now. GGI always studies industry usage of “Corporate R&D-Product Development Metrics.” What dashboard metrics are the top executives using these days, and what is changing over the past 5-10-15 years? This study researched 101 individual metrics. All 101 metrics are exclusively “overall performance metrics for R&D-Product Development as a whole,” the ones CEOs might wish to look at along with their VP R&D-Product Development. We had to limit the number to 101. Industry usage of known metrics, and now many permutations thereof, is exploding. Enabled by the computer age, many more metrics are possible and the cost per metric is lowering.

Leeland Teschler, Machine Design’s long-time Editor, excerpted a piece he entitled the State of R&D shortly after GGI’s research was published. It includes the Top 5 metrics.

NEEDHAM, Mass. — (BUSINESS WIRE) — March 13, 2014 — Goldense Group, Inc. [GGI] announced the completion of its sixth primary research initiative on the strategies, processes, practices, and metrics used in North American R&D and Product Development Innovation. This study focused on R&D Operations, Organic Innovation, Open Innovation [OI], Intellectual Property [IP], and the Top 100 Productivity & Performance Metrics used by corporations.

Two hundred companies from the US, Canada, and Mexico participated in equal proportion to the relative R&D Spending of these three countries, representative of North America. The response rate was 6.5%. A typical respondent company had US$ 4-5B in revenues.

While the relative corporate activity in Basic Research, Applied Research, Advanced Development, and Product Development remained largely constant for the past five years, the infrastructure in these areas experienced significant growth. Growth will continue. Two-thirds indicated innovation will be more important in the next five years than in the past five. Half indicated the same for OI.

The emerging OI and IP marketplaces, corporate enablers to monetize soft assets, continued to grow. Scouting and innovation intermediary firms achieved 15% penetration. Joint innovation ventures are reported by more than a third of respondents. Corporate abilities to track revenues and profits lag abilities to track costs, this is especially true for OI.

Seventy percent indicate that IP will be more or much important in the next five years. Three quarters indicate that the financial impact of IP is positive, none indicated negative. Over a third indicated they have formalized processes for monetizing IP. Thirty percent are changing their Trade Secret practices, now that First-To-File has become law in the United States.

After fifteen years of little change in corporate metrics for R&D and Product Development, there has been a sea change in the use of metrics to focus on business results in the past five years. The “R&D sand box” is almost gone. Twenty-three of the Top 25 metrics now measure pipeline attributes, productivity, and results.

Measuring Competencies In Lean & Innovative Companies, October 16, 2013, focuses on metrics that are part of the Functional/Technical subgroup of metrics. Projects/Programs, Improvement, and culminating Corporate-Level metrics are the other subgroups. Competency measurement, without yet being statistically shown, will be ultimately be shown to correlate with corporate success.

Another group of metrics that will ultimately be shown to correlate with corporate success are the metrics that are “Proactive & Predictive” for projects and programs. GGI is credited with codifying a group of metrics that precede a go-no go approval decision that take risk out of projects and their resultant products, and coining them as Proactive. In sequence, Predictive metrics begin at project/product approval and generally cease when an initial form and function prototype is realized. Predictive metrics compare updates against the approved plan to track deviation or convergence. Together, both Proactive and Predictive metrics are quite useful in eliminating risk and variation in the pre, early, and mid stages of R&D investments.

The vast majority of all R&D spending across the globe is directed to project and programs. Relative to all other categories and types of R&D measurement, excepting the same types of metrics for products, metrics that enable the ability to show what might, could, or will happen to the volume of spending on projects and programs are perhaps the most important. Practically speaking, if a company performs poorly on a project, it is immediately visible within the company. If less than desired performance continues across multiple projects over time, performance usually becomes visible in the products emanating from the company and begins to affect branding, reputation, and pricing. A company can typically recover from a single product that does not live up to expectations. But, when the “product development factory of projects and programs” falls short of expectations multiple times the impact on products and the portfolio is rarely escaped.

Will we ever get to the level of process control over WIP that we now enjoy in manufacturing and other operations functions? Certainly not, nor do we wish to do so. Necessarily we wish to have more probability and variability in product development or we would quash innovation.

Today though, we still suffer way too much air time discussing the metrics that account for “what has happened.” Yes, these “reactive” metrics have a place. It is necessary to measure and record what has or did happen. Reactive metrics also play quite well to the capabilities of North American professionals, who are generally world class problem fixers. A key remaining opportunity for project and program measurement is to develop better proactive and/or predictive correction abilities.

What should or can be measured, early in the cycle, that will give actionable indications that the promised results for the project or the product are deviating from or converging to plans and promises? Is there even one measure in existence today that can be taken early in product development that has been shown to have a 1:1 correlation with the promised plan or output? Not yet. Operations, finance, sales and other company areas have such measures though. Relatively speaking, the science of R&D project and program metrics and measures still has some greenfield in front of it in comparison to the measurement proficiencies that other business functions have attained for the monies and capital entrusted top them.

On April 3, 2014, GGI will be presenting a webinar in conjunction with Lorman Education Services entitled “R&D Metrics For Manufacturers: Measuring Your Productivity.” A number of topics will be discussed, including “New Process-Ware Preceding Stage-Gate,” “Emergent Innovation-Age Metrics,” and “State-Of-The-Industry R&D Metrics Practices In 2013.”

GGI has just completed a primary research study of 200 companies in North America that will be published in early 2014. This webinar will include information from several areas of the research related to “R&D Operating Environment,” “Organic Innovation,” and “Top Corporate Metrics Used In Industry R&D Practices.”

Some highlights of our planned discussion on April 3 will hopefully entice you to spend an hour with us starting at 1:00 PM CDT. This blog post will be updated at the bottom of this post with the registration details and codes when they become available.

WEBINAR OVERVIEW

Globalization, business alliances, open innovation, and improved improved organic innovation initiatives to gain strategic advantage in this era of global competition are driving significant changes in measurement practices for innovative functions. The depth of the recent recession augmented the rate of change.

GGI has been tracking the R&D and Product Development metrics used by industry for twenty-five years, and regularly for the past fifteen years. Our 2013 findings indicate that there is now a clear industry-wide focus for R&D metrics to address business results. That has not always been the case. “Business results” does not equate to conservative portfolios either. There are more risk monies being spent. But, a plethora of newly developed processes to oversee risky and exploratory activities now keeps a business focus on these early stage activities; and is causing a need for new metrics. The sand box definitely shrunk in the past five years. The entire pipeline portfolio is receiving increased scrutiny.

Shifts in the priority of a number of measures towards measuring business results have been on track since the 1990s at a slow pace. Our 2008 findings indicated some type of inflection point in real priorities was nearing. A comparison of the same twenty-five metrics between 2008 and 2013 shows a clear priority shift, that will likely be permanent.

Finally, intellectual property is increasingly being used as a revenue and profit generation tool; and as a revenue and profit protection tool.

In summary, R&D productivity improvements are being driven by a combination of “business environment” factors and the “maturation of the monetizable IP marketplace.” Existing metrics are being elevated or demoted to support today’s needs and opportunities. New metrics are being created to measure R&D areas that have not previously existed, or were not of a size or importance that warranted corporate measurement.

WEBINAR AGENDA

I. R&D Management Evolution & Revolution

Timeline 1940-2025

Best Practice Process Execution

New Basic & Applied Research and Advanced & Product Development Practices

This Summit will provide participants with a snapshot of the evolution, current status, and projected future of R&D and Product Development Metrics as viewed from the top of corporations.

During the first two seminars of the Summit, we will teach the Body of Knowledge of R&D and Product Development Metrics — with a focus towards the measures that company Officers and Senior Executives need to manage the organization and its performance as a whole. The first one-day seminar is dedicated to focus on the metrics for decisions and issues that Officers and Senior Executives face in directing and measuring overall performance and entire organizations. The three most adopted industry metrics of the past decade will be discussed, along with a number of other all-in-one metrics: 3M’s “Vitality Index,” the emergent “Return On Innovation” metric, and the rejuvenated “Return On Capital.” Capacity, pipeline and portfolio management, hurdle rates, risk, and trade-off analysis discussions round out the first day. The second seminar, a half-day concluding with an early afternoon luncheon, is dedicated to “proactive” and “predictive” metrics. Proactive metrics lower the risk of R&D investments before they are approved. Predictive metrics improve the ability to foresee the execution and financial outcomes of approved investments.

During the third and final seminar of the Summit, participants will break into working groups to create a “set of metrics” suitable for managing and monitoring R&D and/or Product Development organizations as a whole — including Projects, Technical & Functional Disciplines, Improvement Initiatives, and the overall Corporate Performance of R&D. Applied Research and Advanced Development organizations are easily accommodated as well in a single integrated framework, for companies with multiple development organizations. The Linked Metrics Portfolio® approach, preferred to the Balanced Scorecard for managing R&D and Product Development, will frame the exercise.

Senior executives wishing to put themselves and their fellow senior executives in a better position to direct and drive product creation and commercialization should strongly consider attending. Several of our prior participants have said, “this Summit covers everything an Officer or Senior Manager needs to know on the subject of Metrics.” GGI, a 28-year old company, has been recognized as a thought leader and practitioner in this field since the early 1990s.

Finally, and this is not true of all GGI Metrics Summits, GGI has just completed our 6th North American study of R&D and Product Development practices in the areas of R&D Operating Environments, Organic Innovation, Open Innovation, Intellectual Property, and the Top Corporate R&D Metrics In Use. Two-hundred companies from the USA, Canada, and Mexico participated in numbers that represent the relative R&D spending of the North American countries. It will be difficult to find information that is more current to augment the practical nature and usable outcomes of this 17th Metrics Summit.

The purpose of the 16th Metrics Summit is to robustly address the metrics that are needed by R&D and Product Development leaders to maximize their company’s return from its investment in R&D. The focus of the Summit will be at the VP/CTO level. We will cover the few metrics and performance indicators that are reported upward to the CEO. We will cover the greater number of metrics that are needed by the VP/CTO to manage activities and operations that report within the R&D-Product Development organization. This is the first day and one-half.

We will then commence a Workshop where the executives will choose into their working groups based on the commonality of their R&D Strategy. It is not every day that one gets to sit down with peers who also have the challenge of deciding the “best metrics” to support the achievement of R&D Strategy. Many lasting relationships are built at our Summits because folks face the same challenges. Is your R&D Strategy to be an Innovator? Is it Platform-Derivative? Are you a Balanced Portfolio strategy? Do you focus on being second or later to market, with a better price and service? There are other competitive strategies as well. The best metrics for each of these strategies are different. Further, if revenue and profit maximization is paramount then your metrics will be different than if asset maximization is paramount. For example, a capital-intensive Innovator will have many different measures than would a revenue-profit innovator.

During the Workshop several subjects will be interspersed that are necessary for comprehensive measurement of research and development, but whose metrics are usually in supporting roles to the CEO-Level metrics, including: Advanced Development, Functional and Technical Competencies, Intellectual Property, Program Management, and Improvement Projects among other topics. At the conclusion of the Summit, the “best metrics for a given strategy,” the “necessary metrics to oversee R&D,” and “the total number of metrics required” will be apparent to all participants.

Unique to this 16th Summit will be a hot-off-the-press statistically valid study of the metrics used by 200 companies to measure R&D-Product Development. GGI, a twenty-seven year old company has been performing primary research in metrics since 1998. A rank-order list of one-hundred one metrics, indicating the percentage at which a metric has penetrated industry, is sure to be a stimulating undercurrent at this Summit. Our 2008 research indicated that profit, productivity, competency, intellectual property finance, and aggregate measures of innovation and innovative ability were on the rise. We expect to see the measures of advanced research and development organizations join the risers in 2013.

Senior executives wishing to put themselves and their fellow senior executives in a better position to direct and drive product creation and commercialization should strongly consider attending. A great number of our participants have said, “this Summit covers everything an Officer or Senior Manager needs to know on the subject of Metrics – a rigorous learning experience that can be put to immediate use.”

One of these areas is “competency measurement.” While there are hundreds if not thousands of competencies that companies may be concerned about, and those competencies differ significantly by industry and by a company’s competitive strategy and position, the subject can be simplified by thinking of two basic types that apply in all cases. In short, there are “Core Competencies” and “Functional or Technical Competencies.”

In most companies, there is still little distinction between these two groups. That is perhaps to be expected because initial codification did not appear in literature until the early 1990s and the subject matter is still relatively new. There are great differences between these two groups however.

Core Competencies refer to the “handful or less of the capabilities of a given company that enable it to compete and succeed in its industry and/or relative to its competitors.” The best description and context that I have come across for Core Competencies was published by C. K. Prahalad in his 1994 book entitled “Competing For The Future: Breakthrough Strategies For Seizing Control Of Your Industry And Creating The Markets Of Tomorrow,“ which he co-wrote with Gary Hamel. In their book, the authors offer that even the largest of companies have only one to three Core Competencies.

In contrast are the myriad of functional and technical competencies that must be built and maintained for individuals, cost centers, departments, and business units for the company to compete and succeed. Functional and technical competencies generally enable the resultant core competencies. In rare cases a functional or technical competency may also be a core competency, but usually not.

Measuring Competencies in Lean and Innovative Companies[Machine Design – October 10, 2013], discusses key factors that are driving the growth in functional and technical competency measurement. Lean practices started the ball rolling in the 1990s. Globalization changed the basis of competition for many company companies in the 2000s. The need for repeatable “factory-like” product innovation is putting the capstone in place in the 2010s. Seasoned product developers are having different reactions than are folks that have entered the work force more recently.

Intellectual Property Changes In The Next 15 Years, April 5, 2011, discussed the “Seven Generations” of Product Development that have occurred in the past 60 years and are occurring in the next 20 years. These Generations serve as a useful guideline for professionals that have the responsibility to direct and guide other professionals toward a common goal in the technical functions of a corporation.

Industry currently has feet in two generations at the same time, “Technology Push” and “IP Enabled.” What is happening in technology in all industries today makes the boom of the late 1990s pale in comparison. The same can be said of IP, and it has very little to do with the “First-To-File” legislation that went into effect on March 16, 2013. FTF caused almost no change for non-US corporations who already had their procedures set up for FTF. Most US corporations had adequate time to reset to FTF. GGI is currently doing research on whether or not FTF caused change to company trade secret policies and procedures, more on that by late fall. No, the commoditization and monetization of IP is the big deal. When IP can be readily sold, especially before it is put into a product, many corporations will evolve their approach to product development.

After achieving “The 80-20 Rule” for effective and efficient Distribution Operations in the 1980s, and the same for Manufacturing Operations by the early 2000s, leading companies are now closing in on Product Development. Industry demand is growing for overall measures of effectiveness, efficiency, productivity, execution, innovation, and R&D-based intellectual property.

While both capital-based measures as well as revenue/income-based measures are being experimented with, and noting that certain capital-intensive industries may be best measured with capital-based measures, two revenue/income-based measures appear to be heading to widespread adoption.

Vitality Index

Bleeding-edge companies started optimizing R&D in earnest in the mid-1980s. These companies included Northern Telecom, HP, Corning, Motorola, Apple, and 3M. It was 3M that first recognized the need for an overall measure of innovativeness. They created a metric named the “Vitality Index” in 1988. It measured “new product revenues as a percent of total revenues.” Relatively easy to calculate, the only management decision is how long a launched product remained “new.” The letter “N,” meaning the number of years a product is new, came to represent that decision. Most companies in industry have N = 3. A product is new for 3 years. But, anything goes. I have seen N = 9 months in some Silicon Valley companies to N = 5 or 7 years if you make airplanes or battleships. Companies with long product life cycles that include spare part sales for decades often struggle to separate highly profitable maintenance and spare parts from the newness of the product. If you are weighing a longer vs shorter N, go with the shorter N. A shorter N will never put as big a smile on your face at meetings, but it will always be contributing more to the long term health of your company.

GGI classifies Vitality as a measure of “Effectiveness.” It does not have a denominator. If new products are more profitable than old products at your company, and profit is important to your company, then the Vitality Index is one of the best effectiveness measures available today.

Revenue measures remain the most popular aggregate measures of R&D today. Measures of R&D contribution to profit are rapidly rising over the past five years however. Ultimately, measures of “R&D Profitability” will become equal with “R&D Revenue Production.” For two decades, we have found it useful to utilize more mundane terminology to describe the Vitality Index with that thinking in mind. Vitality is “the current-year sales due to products released in the prior ‘N’ years.” We recommend equally watching “the current-year profits” due to products released in the prior ‘N’ years.” It is this profit measure that became the numerator of the Return On Innovation metric in the early 2000s.

Return On Innovation

Some time in the early 2000s, from no source in particular, a metric with a confusing acronym started to pop up. “Return On Innovation [ROI]” [Figure 1] is often spoken, versus using the acronym, so it is not confused with “Return On Investment [ROI].” The former is an overall measure of R&D. The latter is most often a measure of a specific investment, R&D or not. For this piece, ROI is Return On Innovation.

Figure 1: Equation For Return On Innovation

GGI classifies ROI as as a measure of “Efficiency” or “Productivity.” It satisfies all classical Industrial Engineering definitions of Output divided by Input. ROI may possibly be a measure of “Effectiveness” at the same time, but that is on a case-by-case basis. The only reason to make that point is some corporations are not yet “effective” in R&D. “Efficiency” initiatives are secondary to first achieving effectiveness. This is especially true for R&D which has a disproportionate role in generating the future health of the company.The numerator of ROI is “the current-year profits” due to products released in the prior ‘N’ years,” as described in the last paragraph of the Vitality Index section above. The denominator of ROI is “the R&D Investment for the same “N” length of time.” This all seems simple enough, but industry appears to be calculating this metric at least six different ways. The two variables are whether simply to add revenues and divide by R&D expenses, or to apply Net Present Value to the numerator and Forward Value the denominator to arrive at a singular matching calendar year ROI calculation. Some Net Present Value the numerator but simply add the denominator figures together. The other major permutation in calculations, assuming N=3, is whether the “year 6-5-4” expenditures lead to the “year 3-2-1” revenues and profits. Some companies do it that way. Some companies use 3-2-1 in the numerator and in the denominator. Other companies do things like “year 5-4-3” leads to “year 3-2-1,” or other overlapping approaches.

Companies not already calculating ROI in some fashion should examine the utility of this metric. Just pick an approach that makes sense to your company and measure against yourself. While ROI does not have the twenty-five year familiarity of the Vitality Index, the train is on the tracks for ROI. Smart Wall Street analysts are already asking about the Vitality Index, and so too will they eventually ask about ROI.

Industry Penetration Of ROI & Vitality

GGI has conducted research on industry’s utilization of some 88 R&D-Product Development metrics for over a decade, surveying approximately every other year. We began our primary research activities in 1998.

The Vitality Index is approximately 25 years old. It is used by 56% of companies. It is the 4th most frequently used corporate R&D metric. It is the top “performance metric” used by R&D.

Return On Innovation is approximately 10-12 years old. It is used by 25% of companies. It is the 19th most frequently used corporate R&D metric. It is the 8th most frequently used performance metric by R&D.

Adapting ROI & Vitality To Research & Advanced Development

Usage of the term “Product Development” heretofore, has largely referred to the more deterministic part of R&D related to identifying, defining, developing, and commercializing products. Basic and Applied Research, Technology Development, and Advanced Development are activities that are more “R” than they are “D” [Figure 2].

Figure 2: The Continuum Of Corporate R&D Strategies

Some companies include the expenses for these research-oriented activities when calculating their ROI or Vitality and some do not. It will be a number of years still before there will be a “best practice” or “industry accepted standard” of calculating ROI or Vitality. No surprise there my friends, this is R&D.

What is interesting however, is that with corporate increases in budgets the last few years for more research-oriented activities aimed at increasing overall innovation, is that some companies are adapting ROI and Vitality to try to get a viable measure of their research-oriented expenditures in commercial terminology – dollars and sense. Both metrics are quite easily adapted to get a handle on the contribution of advanced development activities to the commercial product portfolio.

Adapting the Vitality Index is easiest, “% Vitality Index Containing Advanced Development Content.” The counting problems relating to determing the products that contain advance content are managable. Some companies are able to automate counting by intelligently linking project numbers.

GGI was among the first to adapt the ROI metric, we call it “Advanced Development Return On Innovation [ADROI]” [Figure 3]. We have also called it “Research Return On Innovation.” Early adopting companies have been using this metric, and its variations, for about a decade.

Figure 3: Equation For Advanced Development Return On Innovation

Adapting ROI to be ADROI is a bit trickier. The numerator is easy. It is the same as Return On Innovation, but only includes the profits from products with advance content. Again, the counting challenges are manageable. The denominator has multiple considerations. It often needs to be adjusted to include the expenses of these research activities. Enterprising executives work hard to minimize the ROI denominator. And, research-related expenses are sometimes structurally reported separately for several reasons. Then, research precedes Product Development by several years and period and sunk cost issues come into play. Visits to Iron Mountain may be necessary. Finally, it is important to note that all advance expenses should be included and not just the ones with content in the revenue stream. The goal of the metric is to measure the commercial output of all those early and risky bets that were taken by top management with the goal to raise corporate innovation levels.

There are no standards yet for these “advance metrics.” They are in their infancy. If you are up to it, just pick a logical approach for your company and do it consistently. Measure against yourself. If you save your detailed numbers, you will be able to adjust them to benchmark against other companies when industry begins its adoption curve. These areas were “sandbox” and were handled differently for decades. Management science will improve greatly in the decade ahead in the pursuit and refinement of innovation.

The “Innovation Era” is causing tangible changes to R&D and Product Development measurement dashboards. Three major trends have become clear in the past couple of years.

First, small amounts are being shaved off traditional new product budgets and are being reallocated to advanced projects that management believes either may or will have a higher return on innovation. These reallocations often result in double-digit increases in the budgets for highly innovative and advanced products. For instance, say the historical budget for traditional products is 90% of R&D spending and the historical budget for more risky projects is 10%. If 2% was shaved off the 90% and reallocated to the 10% risky, then a double digit increase in risky takes place. As a result, measures are now needed to understand the efficacy and effectiveness of these changes in the allocation of R&D spending. As pure innovation plays often take more time to get to market, it is becoming increasingly challenging to find metrics that capture the essence of this additional risk to determine if it is resulting in premiums in the marketplace.

Second, patents and other forms of intellectual property are becoming more important. The ability to monetize IP has increased already and that trend is continuing. In the next decade, the ability to transact an IP sale will begin to rival the ability to transact a product sale. Business and product plans, and their associated decision-making processes, will evolve to weight products and their associated IP equally as potential revenue/profit streams for any given R&D investment. Product development professionals will increase the amount that they work concurrently with their IP counterparts, and the concurrency will all start earlier in concepting and inventive processes. These historically interfaced but not integrated organizations will become much more unified.

Third, underpinning this all is the ever growing importance of maintaining core and functional competencies. With global knowledge doubling just about every year for the last two decades, keeping staff current on the skills of today while simultaneously building new skills for the not-very-distant future is now a necessity. Human resource management practices are adapting to facilitate the active management of individual and department competencies. Industry has known for years that the range of individual skills for the same job grade in the same department can differ by ten to one. This historically touchy subject is mitigating itself somewhat and competency measurement can now be addressed with less potential repercussions.

These emerging macro trends are changing the constructs of R&D-Product Development metrics and their associated dashboards. Frameworks of the future will need to be more robust in their ability to capture results over longer time periods, to capture results that are not measured by the sale of products, and to capture results originating from flatter knowledge-based organizations.

Our global citizens realizing the true and ultimate importance of “Intellectual Property [IP]” is coming none too soon. “Non-Organic” Open Innovation is rapidly growing as is “Organic” Innovation; and one also begets the other after a fashion. In a couple decades, Open Innovation will become much more embedded and produce the level of financial yields that Organic currently does. The ultimate result can only be more Generation 6 Technology Push [Exhibit A], “build it and they will come.” The incubation time is still uncertain, but we will recognize its success because it will have most of the exciting aspects of the “dot com boom” of the late 1990s.

EXHIBIT A
The Seven Generations Of Concurrent R&D-Product Development-IP Practices

While all that will be wonderful, and will hopefully help restore economic health around the globe in the coming years, there is money involved at every step. Be sure that all countries and all companies and all individuals will be a lot clearer on how to strategize, identify, create, package, value, share, trade, maintain, administrate, retire, and portfolio-manage all forms and categories of intellectual property in the not too distant future.

If trends go like the explosive US bond market of the early 1980s, and there is a Mike Milliken to boot, new forms and categories and packagings of IP will emerge during this 7th Generation [Exhibit A]. Yes, some of them will be junk too. The lion’s share however will redefine the balance of value of corporations and countries in the future, not just in the financial markets but in annual corporate balance sheets and income statements [Exhibit B]. The best companies are already making provisions for this outcome.

“Deliberateness with patience” will be the best approach. To get to the other side of this “IP-Enabled 7th Generation” requires that government make changes, and not just academia and industry. So far, the prior six generations [Exhibit A] of improvement in creation functions have not had to have government cooperation to get to the other side. Ultimately IP will be freely traded and exchanged as a commodity, much like wheat or soy beans or historic cars at an auction. Industry is already trading IP in open public markets and auctions. Mutual funds and ETFs based on the estimated intellectual property content in public corporations can already be bought and sold through retail brokerage firms.

From a work method viewpoint though, Intellectual Property is still a functional-sequential process in most corporations. Worse yet is that is not clear, that when compared to other common business practices and activities, if the overall internal IP process is even a rapid functional-sequential process. IP professionals are too often brought in late in product creation processes. Packages of information are too often tossed over-the-wall to the next function responsible for handling the package. IP is too often outsourced to legal entities whose domain knowledge is sometimes so limited that it relegates IP to be an administrative activity. Too often, corporate managers view IP as a pure expense. Compartmentalization and control is the result. More balanced perceptions that also view IP as a potential source of revenue and profit are necessary.

Yes, the product developers are learning more about IP. Yes, the technical capabilities of lawyers are increasing. Yes, financial professionals have increased awareness about the value of IP. However, relative knowledge and empathy is still much like the 1980s. Engineers did not know what the manufacturing people needed to know, and the manufacturing people did not know what the engineers needed to know. The empathy for IP is still too low. The touch points between product development processes and IP processes have recently started to become clearly marked on most product development and R&D process diagrams. Persons, although often physically proximal nowadays, remain largely engaged in their own process and their specific domain knowledge. There are too few integrated and concurrent practices at this time.

In the coming decade and beyond, the “IP Pipeline” will become much more congruent with the product pipeline. It will be followed by a Sales and Marketing cycle that will look and feel just like the sale of products. Likely, many Sales professionals will be responsible for representing both at any given customer account. Responsibilities will be portrayed in a common process that is inclusive of key product and IP disciplines working in a concurrent method. Business Plans will have two revenue and profit forecast sections, one for product revenues and profits and one for the IP revenues and profits. Estimates of financial returns will be calculated individually, and as a whole — in the same business plans and decision documents. It only makes sense. After all, a great percentage of both products and IP are actually derived from the same R&D spending dollars. As well, the current R&D-Product Development decision-making executives will become inclusive of IP decision-makers in an integrated and concurrent manner at every step of the inevitably congruent pipeline.

For more information on the increasing concurrency of R&D-Product Development and IP activities, please refer to an article published in Intellectual Asset Management magazine in the November-December 2009 issue, “Integral IAM and new product processes are the future.” You may contact the publisher directly for a reprint, or download a complimentary copy here.

Many organizations conduct research each year to determine the absolute and relative levels of R&D Spending. Many writers and editors use this research as a barometer of the health of companies and industries. These activities are essential and should not be diminished in any way. Equally important, but much less often investigated, is the allocation of funds within an R&D budget. These changing allocations are every bit the barometer as overall R&D Spending, but are harder to research and therefore to quantify. In short, for the past few years, researchers and authors have been “flowing” with the environment of these economic times. It is popular and noncontroversial to say, “companies are being more prudent with their R&D dollars and are allocating them to shorter term incremental product additions and upgrades to existing products and product lines.” This is safe to write and it feels good to read. It is practical and Wall Street likes it, especially in difficult economic times.

What we are seeing however is profoundly different. We are seeing a clear trend, since FY2005, that companies are shifting more monies to earlier stages of development in the hope of achieving more innovative products with higher margins. Our barometer, which is the “absence or presence of processes to direct and manage earlier stage activities,” is on the rise. Primary research conducted by GGI between August 2007 and February 2008, published May 15, 2008, indicates a significant growth in “process-ware” for development activities that precede product development. Expressed as a continuum, Basic Research is followed by Applied Research is followed by Advanced Development is followed by Product Development. For most companies in most industries, the lion’s share of the budget goes to Product Development. Without being too exact or industry-specific, single digit percentages of R&D Budgets usually go to the three pre-product development activities. It doesn’t take too much financial reallocation to essentially double the budget of these three earlier activities, without significantly affecting the overall budget for Product Development. This is what we see, serious process-ware is being developed as the budgets for these three earlier stages are experiencing significant growth relative to their historical baseline. Some 75% of companies in our statistically valid primary research now have one or more tailored processes to facilitate management’s ability to direct earlier-stage innovation.

It is hard to reconcile the research of the “big houses” that report budgets being focused on incremental, enhanced, and portfolio-fill products versus our own research. If they are not incorrect and we are not incorrect, then it possibly means that a sort of bimodal distribution of R&D spending is developing. Companies are making sure there is something new each year to keep their sizzle in the marketplace while investing more than they have in the past to improve their chances of bigger bangs in the future. In baseball terms, singles, triples, and home runs are a likely future with a drop in the number of doubles being hit by the company teams.

The mix and allocation of spending is equally important to the overall level of spending when it comes to the subject of innovative products that command price premiums.

I would like to welcome readers to GGI’s new blog. After twenty-five years as a corporation with a few hundred published articles and citations in traditional media and press, it seems appropriate to also now author a blog. In the coming months and years ahead, we hope to capture your intellectual curiosity and some of your emotional intelligence. Readers can expect to encounter thought leadership, thought provocation, facts and data, and occassionally some humor requiring very little thought.

In the near term, GGI’s founder, Brad Goldense will be penning most of the content. Over time, we expect to find ways to integrate some of the themes of our decade-long company newsletter, “GGI RapidNews,” into this forum; including book reviews, key trends, and essential news items for professionals in leading positions.

The initial purpose of GGI’s Driving Product Development™ blog is to explore the continuously evolving techniques and technologies of product strategy, creation, development, and early commercialzation that enable corporations to achieve higher returns for their shareholders.

Call us old timers, but “value-chain” and “value-added” are terms that will always ring true and are equally applicable both intra-company and inter-company. It may not be popular or voiced very often, but top managers know that all business functions are not created equal and all business-to-business relationships as well. Sure, every business function over time will have its day in the sun. Also sure is that each business-to-business relationship will have days in the sun. But, on a day-to-day basis, certain activities require unyielding focus and attention to generate the ongoing value that ultimately propels companies to outperform their competitors. R&D and Product Development are among the most important business areas. Focus on these activities is the centerpiece of GGI’s blog.